University of California Berkeley
Regional Oral History Office University of California
The Bancroft Library Berkeley, California
Program in the History of the Biological Sciences and Biotechnology
Thomas J. Perkins
KLEINER PERKINS, VENTURE CAPITAL, AND THE CHAIRMANSHIP OF GENENTECH,
1976-1995
With Introductions by
Brook Byers
Samuel D. Colella
Reid Dennis
Franklin "Pitch" Johnson
Thomas D. Kiley
C. Richard Kramlich
Floyd Kvamme
Interviews Conducted by
Glenn E. Bugos, Ph.D.
in 2001
Copyright 2002 by The Regents of the University of California
Since 1954 the Regional Oral History Office has been interviewing leading participants in or well-placed
witnesses to major events in the development of northern California, the West, and the nation. Oral history
is a method of collecting historical information through tape-recorded interviews between a narrator with
firsthand knowledge of historically significant events and a well-informed interviewer, with the goal of
preserving substantive additions to the historical record. The tape recording is transcribed, lightly edited for
continuity and clarity, and reviewed by the interviewee. The corrected manuscript is indexed, bound with
photographs and illustrative materials, and placed in The Bancroft Library at the University of California,
Berkeley, and in other research collections for scholarly use. Because it is primary material, oral history is
not intended to present the final, verified, or complete narrative of events. It is a spoken account, offered by
the interviewee in response to questioning, and as such it is reflective, partisan, deeply involved, and
irreplaceable.
************************************
All uses of this manuscript are covered by a legal agreement between The Regents
of the University of California and Thomas J. Perkins dated June 2002. The manuscript
is thereby made available for research purposes. All literary rights in the manuscript,
including the right to publish, are reserved to The Bancroft Library of the University of
California, Berkeley. No part of the manuscript may be quoted for publication without
the written permission of the Director of The Bancroft Library of the University of
California, Berkeley.
Requests for permission to quote for publication should be addressed to the
Regional Oral History Office, 486 Bancroft Library, Mail Code 6000, University of
California, Berkeley 94720-6000, and should include identification of the specific passages
to be quoted, anticipated use of the passages, and identification of the user. The legal
agreement with Thomas J. Perkins requires that he be notified of the request and allowed
thirty days in which to respond.
It is recommended that this oral history be cited as follows:
Thomas J. Perkins, "Kleiner Perkins, Venture Capital, and
the Chairmanship of Genentech, 1976-1995," an oral
history conducted in 2001 by Glenn E. Bugos for the
Regional Oral History Office, The Bancroft Library,
University of California, Berkeley, 2002.
Copy no.
Thomas J. Perkins, 2002
photograph courtesy ofGoodby Silverstein & Partners
Cataloguing information
Thomas J. Perkins (b. 1932) Venture Capitalist
Kleiner Perkins, Venture Capital, and the Chairmanship ofGenentech, 1976-1995, 2002, xix, 82pp.
Founding Kleiner & Perkins [later Kleiner Perkins Caufield and Byers] and early investments in
Tandem Computers and Genentech; chairmanship ofGenentech board of directors and executive
committee; hiring Robert Swanson at Kleiner & Perkins and initial dealings with Swanson and
Herbert Boyer to found Genentech; K & P investment in Cetus; subcontracting early Genentech
research to UCSF, City of Hope, and Caltech; investments in early Genentech products; licensing and
manufacturing strategies; clinical trials and dealings with Food and Drug Administration; invention of
clinical R&D partnerships and junior common stock; recruiting Genentech s board; Genentech s IPO;
Genentech as model for Hybritech, Inc.; Kirk Raab as chief operating officer and relationship with
Bob Swanson; licensing agreements with Eli Lilly, KabiVitrum, and others; FIPCO strategy;
Hoffmann-La Roche acquisition ofGenentech; thoughts on investment bankers; patent infringement
litigation; comments on Frederick Frank, James Gower, Fred Middleton, David Packard, Kirk Raab,
Robert Swanson, Jimmy Treybig and others.
Introductions by Brook Byers, Senior Partner, Kleiner Perkins Caufield & Byers; Samuel D.
Colella, Managing Director, Versant Ventures & Managing Director, Institutional Venture
Partners; Reid W. Dennis, Partner Emeritus, Institutional Venture Partners; Franklin "Pitch"
Johnson, Senior Partner, Asset Management Associates; Thomas D. Kiley; C. Richard
Kramlich, Senior Partner, CMEA Ventures; Floyd Kvamme, Senior Partner, Kleiner Perkins
Caufield & Byers.
Interviewed in 2001 by Glenn Bugos for the Program in the History of Biosciences and
Biotechnology, Regional Oral History Office, The Bancroft Library, University of California,
Berkeley.
TABLE OF CONTENTS-Thomas J. Perkins
i
BIOTECHNOLOGY SERIES HISTORY by Sally Smith Hughes
BIOTECHNOLOGY SERIES LIST i
INTRODUCTION by Brook Byers iv
INTRODUCTION by Samuel D. Colella v
INTRODUCTION by Reid Dennis vii
INTRODUCTION by Franklin "Pitch" Johnson viii
INTRODUCTION by Thomas Kiley ix
INTRODUCTION by C. Richard Kramlich xiii
INTRODUCTION by Floyd Kvamme xiv
INTERVIEW HISTORY by Glenn E. Bugos xvi
BIOGRAPHICAL INFORMATION xviii
Perkins at Genentech, from 30,000 Feet
First Kleiner & Perkins Partnership
Hiring Bob Swanson
Kleiner & Perkins Invests in Cetus
Swanson and Boyer Found Genentech 4
Initial Financing
Risk Reduction in the Business Plan
Subcontracting the Research
Proof of Concept 6
Additional Investment in Insulin
Building Genentech s Scientific Culture
Swanson s Early Business Affiliations
Patent Rights
Early Financial Engineering
Clinical R&D Partnerships
Junior Common Stock
Pre-IPO Equity Structure
Quarrel with Swanson on IPO Timing
Liquidity As an Issue
Kleiner & Perkins: Commitment to Ventures
Hybritech 14
Focusing Genentech s Strategic Vision 14
Perkins s Friendship with Swanson
Kirk Raab Versus Swanson
Roche Acquisition
White Squire Fund 18
More on the Genentech IPO 1 9
Possible Sale to Eli Lilly, Inc. 19
Picking Investment Bankers 20
Recruiting the Genentech Board of Directors 20
Perkins as Chairman 21
License Agreement with Lilly 22
Negotiating Other Licenses 23
Fully Integrated Pharmaceutical Company (FIPCO) 23
Risk Factors for S-l Registration 25
Hostile Press 25
Food and Drug Administration Approval 26
Growth Hormone Sales Controversy 27
Quiet Period Violation 28
IPO Roadshow 29
Genentech Jolts Wall Street: San Francisco Examiner, 1980 29
Fundraising in the Doldrums 3 1
Japanese Placement 3 1
Downward Pressure From Secondary Shares 32
Selling the Clinical R&D Partnerships 33
Chairing a Public Company 34
Independent Biotechnology 34
Roche Acquisition, 1990: Hiring Frederick Frank of Shearson Lehman 36
Maintaining Secrecy to Avoid an Auction 37
Valuation of Genentech, Inc. 37
Deal Points 38
Raab Becomes CEO 38
Roche People and Practices 39
Loma Prieta Earthquake 40
Final Board Meeting on Swanson s Demands 41
Swanson-Raab Conflict 42
Raab s Skills 44
James Gower s Aggressive Forecast 44
Aggressive Patent Protection 45
Suing the FDA 45
Executive Committee of the Board of Directors 46
Letting Swanson Chair 47
Disengagement from the Board 48
Genentech s Move into Cancer Therapies 48
Kleiner & Perkins Moves away from Biotech 49
Venture Capital in Biotechnology 49
Biomedical Devices and the FDA 50
The Promise of Biotech 51
Belief in God the Creator 52
Perkins s Law 52
The Genentech Model 53
TAPE GUIDE 54
APPENDIX 55
A. Genentech, Inc., "Notice of Annual Meeting of Shareholders to Be Held
April 30, 1979" 56
B. Genentech, Inc., "Proxy Statement for Annual Meeting of Shareholders,
April 9, 1979"
C. Harvard Business School Bulletin, October 1982, "1957: to and from
the 25 th Reunion" 69
D. Genentech, Inc., "Thomas J. Perkins, Member, Board of Directors,"
September 29, 1993
INDEX 80
1
BIOTECHNOLOGY SERIES HISTORY-Sally Smith Hughes, Ph.D.
Genesis of the Program in the History of the Biological Sciences and Biotechnology
In 1996 The Bancroft Library launched the Program in the History of the Biological Sciences and
Biotechnology. Bancroft has strong holdings in the history of the physical sciences-the papers of E.O.
Lawrence, Luis Alvarez, Edwin McMillan, and other campus figures in physics and chemistry, as well as
a number of related oral histories. Yet, although the university is located next to the greatest
concentration of biotechnology companies in the world, Bancroft had no coordinated program to
document the industry or its origins in academic biology.
When Charles Faulhaber arrived in 1995 as Bancroft s director, he agreed on the need to
establish a Bancroft program to capture and preserve the collective memory and papers of university and
corporate scientists and the pioneers who created the biotechnology industry; Documenting and
preserving the history of a science and industry which influences virtually every field of the life sciences
and generates constant public interest and controversy is vital for a proper understanding of science and
business in the late twentieth and early twenty-first centuries.
The Bancroft Library is the ideal location to carry out this historical endeavor. It offers the
combination of experienced oral history and archival personnel and technical resources to execute a
coordinated oral history and archival program. It has an established oral history series in the biological
sciences, an archival division called the History of Science and Technology Program, and the expertise to
develop comprehensive records management plans to safeguard the archives of individuals and
businesses making significant contributions to molecular biology and biotechnology. It also has
longstanding cooperative arrangements with UC San Francisco and Stanford University, the other
research universities in the San Francisco Bay Area.
In April 1996, Daniel E. Koshland, Jr. provided seed money for a center at The Bancroft Library
for historical research on the biological sciences and biotechnology. And then, in early 2001, the
Program in the History of the Biological Sciences and Biotechnology was given great impetus by
Genentech s generous pledge to support documentation of the biotechnology industry.
Thanks to these generous gifts, Bancroft has been building an integrated collection of research
materialsoral history transcripts, personal papers, and archival collectionsrelated to the history of the
biological sciences and biotechnology in university and industry settings. A board composed of
distinguished figures in academia and industry advises on the direction of the oral history and archival
components. The Program s initial concentration is on the San Francisco Bay Area and northern
California. But its ultimate aim is to document the growth of molecular biology as an independent field
of the life sciences, and the subsequent revolution which established biotechnology as a key contribution
of American science and industry.
Oral History Process
The oral history methodology used in this program is that of the Regional Oral History Office,
founded in 1954 and producer of over 2,000 oral histories. The method consists of research in primary
and secondary sources; systematic recorded interviews; transcription, light editing by the interviewer,
and review and approval by the interviewee; library deposition of bound volumes of transcripts with table
of contents, introduction, interview history, and index; cataloging in UC Berkeley and national online
library networks; and publicity through ROHO news releases and announcements in scientific, medical,
and historical journals and newsletters and via the ROHO and UCSF Library Web pages.
11
Oral history as a historical technique has been faulted for its reliance on the vagaries of memory,
its distance from the events discussed, and its subjectivity. All three criticisms are valid; hence the
necessity for using oral history documents in conjunction with other sources in order to reach a
reasonable historical interpretation. 1 Yet these acknowledged weaknesses of oral history, particularly its
subjectivity, are also its strength. Often individual perspectives provide information unobtainable
through more traditional sources. Oral history in skillful hands provides the context in which events
occur~the social, political, economic, and institutional forces which shape the course of events. It also
places a personal face on history which not only enlivens past events but also helps to explain how
individuals affect historical developments.
Emerging Themes
Although the oral history program is still in its initial phase, several themes are emerging. One is
"technology transfer," the complicated process by which scientific discovery moves from the university
laboratory to industry where it contributes to the manufacture of commercial products. The oral histories
show that this trajectory is seldom a linear process, but rather is influenced by institutional and personal
relationships, financial and political climate, and so on.
Another theme is the importance of personality in the conduct of science and business. These
oral histories testify to the fact that who you are, what you have and have not achieved, whom you know,
and how you relate have repercussions for the success or failure of an enterprise, whether scientific or
commercial. Oral history is probably better than any other methodology for documenting these personal
dimensions of history. Its vivid descriptions of personalities and events not only make history vital and
engaging, but also contribute to an understanding of why circumstances occurred in the manner they did.
Molecular biology and biotechnology are fields with high scientific and commercial stakes. As
one might expect, the oral histories reveal the complex interweaving of scientific, business, social, and
personal factors shaping these fields. The expectation is that the oral histories will serve as fertile ground
for research by present and future scholars interested in any number of different aspects of this rich and
fascinating history.
Location of the Oral Histories
Copies of the oral histories are available at the Bancroft, UCSF, and UCLA libraries. They also
may be purchased at cost through the Regional Oral History Office. Some of the oral histories, with
more to come, are available on The Bancroft Library s History of the Biological Sciences and
Biotechnology Website: http://bancroft.berkeley.edu/Biotech/.
Sally Smith Hughes, Ph.D.
Historian of Science
Regional Oral History Office
The Bancroft Library
University of California, Berkeley
October 2002
ir The three criticisms leveled at oral history also apply in many cases to other types of
documentary sources.
Ill
October 2002
ORAL HISTORIES ON BIOTECHNOLOGY
Program in the History of the Biological Sciences and Biotechnology
Paul Berg, Ph.D., "A Stanford Professor s Career in Biochemistry, Science Politics, and the Biotechnology
Industry," 2000
Mary Betlach, Ph.D., "Early Cloning and Recombinant DNA Technology at Herbert W. Boyer s UCSF
Laboratory," 2002
Herbert W. Boyer, Ph.D., "Recombinant DNA Science at UCSF and Its Commercialization at Genentech," 2001
Thomas J. Kiley, "Genentech Legal Counsel and Vice President, 1976-1988, and Entrepreneur" 2002
Arthur Kornberg, M.D., "Biochemistry at Stanford, Biotechnology at DNAX," 1998
Fred A. Middleton, "First Chief Financial Officer at Genentech, 1978-1984," 2002
Thomas J. Perkins, "Kleiner Perkins, Venture Capital, and the Chairmanship of Genentech, 1976-1995," 2002
"Regional Characteristics of Biotechnology in the United States: Perspectives of Three Industry Insiders"
(Hugh D Andrade, David Holveck, and Edward Penhoet), 2001
Niels Reimers, "Stanford s Office of Technology Licensing and the Cohen/Boyer Cloning Patents," 1998
William J. Rutter, Ph.D., "The Department of Biochemistry and the Molecular Approach to Biomedicine at
the University of California, San Francisco," 1998
Robert A. Swanson, "Co-founder, CEO, and Chairman of Genentech, 1976-1996," 2001
Oral histories in process:
Brook Byers
Stanley Cohen
Chiron Corporation
Roberto Crea
David Goeddel
Herbert Heyneker
Irving Johnson
Dennis Kleid
Arthur Levinson
G. Kirk Raab
William J. Rutter, vol. 2
Richard Scheller
Axel Ullrich
Keith R. Yamamoto
IV
INTRODUCTION by Brook Byers
Tom Perkins is one of the best to have ever practiced the art of venture capital. He developed his
depth and style by early hard work in operating positions in technology companies. He worked in sales,
marketing, product management, and then in general management as the founder of the first laser
company and as founder of Hewlett-Packard s Computer Division. Tom pioneered a style in the venture
capital business by founding and developing a firm that took an active role in working on the technology
and marketing challenges faced by management teams as a knowledgeable partner. Tom s
intellectual curiosity about how new technology works led him to be part of most of the key science
revolutions of our time: distributed computing, lasers, biotechnology, and image processing. Tom is the
only person to simultaneously be chairman of the board of three New York Stock Exchange
companiesGenentech, Tandem Computers, and Acuson. The venture capital firm that Tom co-founded
in 1972 has gone on to help fund and grow over 300 technology companies which have combined
revenues over $200 billion, combined market capitalization over $600 billion, and employ over 300,000
people. Along the way, he mentored new generations of partners at KPCB [Kleiner Perkins Caufield and
Byers] to ensure that the firm was "built to last." Everyone who has worked with Tom Perkins feels
privileged to have had the opportunity to work with one of the most remarkable businessmen and science
pioneers of our generation.
Brook Byers
Senior Partner
Kleiner Perkins Caufield & Byers
Menlo Park, California
December 30, 2001
INTRODUCTION by Samuel D. Colella
I enthusiastically responded to the request to write the introduction to Thomas J. Perkins s oral
history. I am anxious to share with the readers my insights about him from the perspective of an
entrepreneur, an operating executive, and a venture capitalist. Given Tom s modesty, I doubt that he
would acknowledge or take credit for the accolades he will receive and his many accomplishments. I
have received a great deal of pleasure out of being able to point to just a few of his gigantic
contributions.
I first met Tom as an entrepreneur when I was a second year student at the Stanford Graduate
School of Business. Along with a classmate and a local inventor, I had written a business plan and was
seeking financing. In addition to approaching the very few venture capitalists that existed, I was advised
to seek out angel capital. I was introduced to Tom Perkins who was known to be interested in helping
aspiring entrepreneurs. Coincidentally, in parallel, a young and innovative company, Spectra Physics,
was aggressively recruiting me. Spectra Physics was the pioneer in the laser industry and had recently
acquired a start up (University Laboratories) financed by Tom and in which he had had a major part in
launching. University Laboratories was Tom s first big success and they were looking for someone to
succeed their current CEO as they were merged into Spectra Physics. In a typical Tom Perkins fashion,
he immediately, and with great conviction, advised me that the choice was a "no brainer"~join Spectra
Physics and run University Laboratories, soon to become the Engineering Laser Systems Division of
Spectra Physics. This characteristic of strong conviction, decisiveness, and incredible insight was
something that I have subsequently observed through my years of association with Tom. As it turned
out, he was rightas he usually isand the choice to join Spectra Physics was a wise one on my part.
In my thirteen years as an operating executive at Spectra Physics, Tom was a major contributor
on the Board of Directors. He was known for being totally attentive at Board meetings, where he sat at
the front of the room with his steno pad and his wooden pencil. It wasn t long before he gained a
reputation for drilling down into the essential facts of a presentation and dismissing all irrelevant
materials. He focused on the critical variables and debated those intelligently and articulately. I
frequently counseled my division managers, who were presenting some aspect of their business to the
Board and seeking approval, that Tom would immediately find the weak points in their proposal. They
had better be prepared to defend their position and to justify their proposals and, in particular, to debate
the soft points in their presentation. Tom was very direct and to the point, but he took care not to
demoralize or humiliate the presenter. He would not, however, let up until he was satisfied that there
was an action program, or that decisions had been made that were consistent with the facts presented. He
did not pontificate and he was not one who liked to hear himself talk. He was, above all, results-oriented
and demanding of superior performance.
Tom became my confidant on the Board of Directors and, in many ways, my mentor. I sought
him out when I had difficult decisions to make; I valued his inputs and marveled at his judgment. Rarely
did I find him to be wrong.
I was amazed that Tom always had time for me. His schedule was incredibly hectic, but he
would take a call or a visit no matter how busy he was. He was also willing to help in personal matters
and career counseling. I recall a specific incident where I had received an offer to leave Spectra Physics
and join a start up with an incredible signing bonus. I decided that I would seek Tom s counsel. The
weak point in this situation was the reputation of the financial backers of the start up. They had a
checkered background and were not of the caliber or quality that Tom or I was accustomed to associating
VI
with. Without hesitation, Tom adamantly opposed my considering the offer not because the business
or the market wasn t promising, but because the people that I would associate with were not up to his
standards. His statement was: "In this valley, the most important asset you have is your reputation and
that is what you will build on and live with for the rest of your career and life. Don t jeopardize it."
After thirteen productive and satisfying years at Spectra Physics, it was time for me to seek a
new challenge. So, whom did I seek out but Tom Perkins? Within minutes of our meeting he said, "You
should become a venture capitalist." He gave me the convincing argument as to why I belonged in the
business. He further stated that he was going to introduce me to the five leading venture capital firms
that he felt would be a great fit for me. Within an hour after leaving Tom I had received two calls with
invitations to follow-up meetings based on Tom s introduction. I was fortunate to have a number of
choices for a venture career, but again it was Tom s input that most influenced me. Tom s guidance was:
"You and Reid Dennis will make a great team at IVP [Institutional Venture Partners]." And again, he
was correct!
Shortly after I joined IVP, Tom called me and said, "Since I got you in the business, I m going to
start you off with a winner," and he proceeded to introduce me to an exciting company that Kleiner,
Perkins had helped start. This became my first investment and it was a great opportunity to work with
Tom in another capacityas a venture capitalist and board member. While I could probably write an
entire chapter on this company, because it has turned out to be one of the most bizarre that I have been
affiliated with in my seventeen years of venture capital, the benefit turned out not to be the financial
return, but the opportunity to watch Tom in action. His determination to succeed and his focus were
amazing. This company faced an above-average number of hurdles and obstacles to success, but in
every case Tom led the charge in finding solutions to the obstacles. He rolled up his sleeves and was
more a member of the team than he was the renowned financier. We worked side-by-side with
management to move this company ahead. He was incredibly persuasive in getting other investors to
join us despite these challenges, and he continued to convince his partners to support the company in
round after round of financing. His conviction that this was a winner was motivating to the team, to the
Board, and to the investors. There was never a consideration of giving up. Thanks to Tom, I not only
received a lesson in venture capital 101, but I got my graduate degree from that very first investment.
As I look back on the impact that Tom Perkins has had on my career, I owe him a great deal of
thanks. In reflection, I realize that Tom s example and his lessons to me as an entrepreneur, an operating
executive, and a venture capitalist, have greatly influenced how I have conducted myself in my career.
As a venture capitalist, I have a great deal of respect for entrepreneurs, a lot of patience, but
determination and a competitiveness to succeed that has been inspired by Tom Perkins. While this is
only one man s input or perspective, I trust that when the entire story is told, it will be realized that Tom
will be one of the great contributors to making Northern California a mecca for venture capital.
Samuel D. Colella
Managing Director
Versant Ventures
Managing Director
Institutional Venture Partners
Menlo Park, CA
December 20, 2001
Vll
INTRODUCTION by Reid W. Dennis
Although I had met him previously on several occasions, my first meaningful encounter with
Tom Perkins occurred early in May 1974, when we were both invited to speak at a seminar on venture
capital sponsored by the University of Washington in Seattle. A month before, Surge Jamieson, Burt
McMurtry, and I had successfully closed a $19 million fund, Institutional Venture Associates [IV A], and
now we were all trying our best to generate deal flow. It was a quiet time in the venture capital industry:
interest rates were starting to go through the roof, the stock market was about to begin a slide into the
doldrums, good entrepreneurs were scarce, and good "deals" were hard to find!
Tom s presentation was in keeping with the academic setting, for he attacked the venture capital
process the same way he would have attacked any complex engineering problem. I was fascinated by the
way that his mind dealt with the subject; he was thoughtful, analytical, and very detail oriented. It was
obvious that he was very bright and that he had set very high goals both for himself and for his firm. He
was determined to be a leader in this industry, and I hoped that, one day, I would have the opportunity to
work with him.
That opportunity became a reality a couple of years later when Kleiner Perkins agreed to join
IVA as an investor in Collagen Corp., and Tom agreed to go on the board of directors. Collagen was a
struggling medical device company, and Tom was a very conscientious and constructive board member.
However, we were both somewhat dismayed by the problems of dealing with a highly politicized Food
and Drug Administration. After one particularly discouraging meeting, Tom took me aside and said,
"Reid, you have gotten this whole process backwards! You are supposed to invest a little money up.front
and use those funds to reduce the risk before you put in the rest of the money! In this deal, we have to
put up all of the money before we reduce the risk! That doesn t make any sense at all!"
Tom certainly achieved his primary business goal. It was his leadership that created the #1 firm
in the venture capital industry, and there is a wide gulf between that firm and the firm next in line.
Reid W. Dennis
Partner Emeritus
Institutional Venture Partners
Menlo Park, California
January 6, 2002
vm
INTRODUCTION by Franklin "Pitch" Johnson
Tom Perkins started off in venture capital in 1972 with a resume typical of the rest of the small
group in the business on the West Coast: Engineer, MBA, and a strong background in an operating
business. Within a couple of decades, however, he was the prime mover in building the greatest name
in venture capital and one of the very top firms in performance. Tom was an entrepreneur in venture
capital with all the desire to win and unwillingness to fail that characterized the best people he backed.
Tom added some things to the business that were new, or at least gave them much more
emphasis. The first was the idea of incubating people and ideas inside the venture firm. Many of the
entrepreneurial ideas were created in part by Tom. Tandem Computers, and its founding president,
Jim Treybig, lived in its formative months inside the young firm of Kleiner and Perkins. The same
was true of Bob Swanson and Genentech. In case of both these companies, Tom led the way in getting
them other investors when they were ready to leave the K&P offices. He remained an influential
figure, usually as chairman, in the companies he helped create.
A second major innovation was the use of organized public relations. K&P did not hide its
light under a bushel. It sought and received a lot attention in the press, and thereby drew attention to
its deals as well. Prior to Tom the idea was to quietly go about your business, be known in the venture
and the financial communities, but not to seek attention elsewhere. The fame of Kleiner Perkins
Caufield and Byers today rests not only on its creation of many great companies, but on its well-
instrumented approach to public relations, which, to complete the circle, has brought it many top deals
and people.
A third innovation was to lead the way in the care and feeding of limited partners. K&P and
KPCB have not only given strong returns to limited partnerships, but they have, from the earliest days,
made major productions of annual limited partners meetings, both as to content and enjoyment. They
also, early on, made meetings of their entrepreneurs an institution, and organized investment
opportunities for them. In short, Tom s attention to marketing has guided the life of the firm and
shown the way for the venture business.
None of the creative ideas and innovations would have made a big difference, however,
without the brains and emotional brawn of Tom Perkins. Tom stood out, during his career, for having
clear-cut ideas of what he wanted in a given situation, and deflecting or changing those ideas took a lot
of energy from his colleagues. He was, however, generally right. A dead-honest man, he has always
made clear where he stood, and was and is always good for his word.
Although Tom Perkins was not one of the earliest venture capitalists, no one person has had a
greater impact on shaping venture capital into the way it operates today.
Franklin "Pitch" Johnson
Senior Partner
Asset Management Associates
San Francisco, California
December 30, 2001
IX
INTRODUCTION by Thomas D. Kiley 1
Tom Perkins wears charisma in the easy way a fine Italian suit drapes the shoulders. In his
presence you begin to understand the impact President John Fitzgerald Kennedy had on those around
him -the world seems morning fresh, bathed in photographer s light. His attention makes you feel
special.
I recall making a presentation to Genentech s Board of Directors at a time when its
membership included David Packard, Tom s own mentor. Mr. Packard compensated for a hearing
deficit with aids connected to a directional microphone. When he turned the latter in your direction
the world lit up-turned it away and twilight fell. Being with Tom is like that. Because he has done it
all and because of the high standard he represents, people around him are encouraged to reach for the
best within themselves. Doing so has often been to their financial benefit, but I claim the effort he
inspires has as much to do with self worth as with net worth. As Rudyard Kipling s Bandar-log would
cry to one another from their monkey purchase on trees above Bagheera the panther: "He noticed us!"
Tom Perkins is too perfect. Better looking than Kennedy, lanky and laconic like Gary Cooper,
impeccably dressed but laid back enough like a surfer to influence entrepreneurs in long hair and
sandals, and with a mind sharp enough to cut diamonds in the rough, he has cut through life like a
knife through butter. The first thing you need to know about him is that he is too lucky to be let to live
any longer, lest mere mortals despair of rivaling his achievements. 2 Yes, I admire the guy.
Not to say Tom doesn t sometimes suffer. I remember an evening when in the garage of his
Belvedere, California home I was shown one of his collection of classic cars, a Bugatti that needed
lubrication with castor oil. "Run the engine for ten minutes, swallow the fumes, and run for the
gentlemen s room."
Tom was a gentleman with Bugatti sculptures (yes, one of a black panther) in a drawing room
to which one might be conducted to demonstrate, I thought, "You can live like this if you breathe new
life into industries the way Boy Scouts start with tinder and breathe it into fire" the way he did,
always in compliance with precepts as worthy as the Boy Scout oath, supplemented by the various
"laws" attributed over time to him and his partner Eugene Kleiner (about whom more later).
Not to say Tom hasn t really suffered. The tile setters who made each fountain pool at Hearst
Castle always set one tile awry, lest they challenge God s perfection. God reminded Tom we live in an
imperfect paradise when his wife Gerd (nee Thune-Ellefsune), a vivacious and brainy Norwegian
beauty queen, contracted cancer. Gerd sharing Tom s indomitable will, he sharing her pain, together
they endured a years -long journey through the sharp edges and dark valleys of conventional and
experimental therapies before she succumbed. No one claims life is a bed of roses. 3 But as a
monument to love and memory, Tom later restored completely an ancient ruin in Norway where Gerd
1 As an attorney, Mr. Kiley represented Genentech from 1976. In the period 1980-88 he served
variously as vice-president and general counsel and as vice-president for corporate development.
2 As to luck, Louis Pasteur said: "Fortune favors the prepared mind." Tom prepares himself (and
others) for good fortune.
3 1 am reminded of Bob Swanson s heartbreak on hearing his father say: "My son, the big deal,
can t cure me of cancer," [Personal Communication, Robert Swanson to Thomas Kiley] and of Bob s
own untimely demise from the same scourge. Consider how many other lives have been and will be
extended by the biotechnology these men began.
had played as a young girl, adding for good measure a community center and performance venue there.
Always the man has grace, even when standing in ashes.
Tom later married for a time Danielle Steele, a novelist who has affected the world as much as
Tom has in his own, if I may say, more lasting way. I don t know any more about that than I have said.
But Tom and Danielle together are in their different ways exemplars of the special flavor of the San
Francisco Bay area: style, wit, accomplishment, wealth hard-earned. Neither of them is overstated,
neither is understated.
Understatement is not a principal ingredient of Tom s oral history, where he claims a
substantial share of credit for creating the biotechnology industry. In my view, he owns that share.
Let s start with what some have referred to as "Perkins s Law": "Market risk is inversely
proportional to technical risk." 4 If value is evident and technology hurdles low, existing players will
preempt opportunity. It follows what remains to startups will be difficult on one or both horns of the
risk dilemma. A corollary of Perkins s Law has always been to "fail fast" or overcome technology risk
by the lowest cost proof of principle. 5
When Bob Swanson first proposed recombinant DNA as ripe for commercialization, risks of
both kinds abounded. Could bacteria express human hormones from synthetic DNA? Amid
controversy over "genetic engineering," would the environment accept and approve injection of
medicinal proteins so made?
Bob s initial plan built up projections of return based on human insulin economics.
Ultimately, the first science, done in collaboration with The City of Hope National Medical Center and
The University of California at San Francisco (so no laboratories would be constructed at Genentech
expense, and prematurely so), proved the principle by expressing somatostatin, a protein far less
complicated than insulin. Insulin took a year longer and required substantially more money than
Perkins s initial investment in Genentech. But the proof of principle seeded by the initial investment
reduced risk in the analogous insulin project, established patent rights that protected the insulin
opportunity, and reduced market risk by promoting partnership with Eli Lilly, an insulin market leader.
And by this point Kleiner Perkins had invested not more than $200,000. 6
It is possible Tom s parsimony impressed on Bob what he later used to make a private
company public in hard times the financial discipline to eke out profit on short resource, by managing
to the bottom line. To meld metaphors, did Bob learn from getting pushed through Tom s financial
keyhole how to make chicken soup from chicken feathers?
Along the way, a time came when it appeared the somatostatin experiment had failed and the
principle was unfounded. Swanson told me "his life passed before his eyes." But he had the moxie to
4 David A. Kaplan, The Silicon Boys and Their Valley of Dreams, (New York: William Morrow,
1999) p. 176. Kaplan s book holds a wealth of additional information concerning Perkins s background,
neither repeated here nor in the oral history within.
5 According to Perkins s partner John Doerr, Kleiner s First Law is "identify the risk up front and
get rid of it." Ibid., 193. Whether a typesetter transmuted this from Kleiners , implying the venture
capital firm Kleiner Perkins, is unknown.
6 At the peak of trading on the day four years later when Genentech became a public company,
the value of shares so purchased had increased 800 fold.
XI
ignore "Kleiner s Second Law" "There is a time when panic is the appropriate response," 7 and
soldiered on to success.
Now, before attempting to answer the question how to parse credit among Swanson, Perkins,
and others for the business genius of Genentech s founding, I d like to make a side journey to what
others have called "Kleiner s First Law 8 "-"When the money s available, take it."
According to Tom, in a "heated discussion," Bob resisted as premature Tom s proposal that
Genentech undertake a public financing in 1980. 9 Bob s own oral history 10 is silent on that point,
though in later years I often heard him refer approvingly to this First Law. All are aware of the
celebrated IPO that ensued October 14, 1980 and proved the proposition that public finance would be
available for biotechnology companies. But Perkins acknowledges the offering "was a huge amount of
additional work for [Swanson]. Not for me." 11 With the company on a sound footing and Perkins s
firm able in law to distribute its holdings shortly after, 12 Tom nevertheless remained active as chairman
for many years, consistent with the hands-on, value-added traits that have always been characteristic of
the Kleiner Perkins approach.
Now as between Bob and Tom and for that matter Eugene Kleiner, whose experience with Bob
preceded Tom s own, how to apportion credit?
I will begin by paraphrasing Tom: "Bob did the work." 13 But if Swanson was the father of the
biotechnology industry, as is often said, Perkins was plainly his mentor then and for a long time to
come. The early years of Genentech seem to bear the thumb prints of both Perkins and Kleiner and all
their eponymous laws, and some that might be called after Swanson himself "science first," "share
the wealth," "share the credit," "focus, focus, focus," and so on. 14
In the early days of Genentech, it sometimes seemed annual strategies were divined by looking
back at what had been accomplished, largely from necessity, in the year just past. It is all too
convenient, in the retrospective lens of a quarter century and more, to assign prescience to a time when
the "sciences" of both biotechnology and venture capital at large were germinal.
Consider that Kleiner Perkins s first fund, raised only four years in the advent of Genentech,
was a modest $8 million. Consider that of the companies it funded, only Tandem Computers and
Genentech attained prominence sufficient to countenance without embarrassment the promulgation by
7 Kaplan, n. 4, p. 176.
8 Ibid. But Kleiner doesn t recall having ever said this.
See this volume at p. 12.
10 Robert A. Swanson, "Co-founder, Chairman, and CEO of Genentech, Inc.," conducted in 1996-
97 by Sally Smith Hughes, Ph.D., Regional Oral History Office, The Bancroft Library, University of
California, Berkeley, 2001.
"See this volume at p. 12.
12 Not to say they did so all at once more likely they managed distribution consistent with the
combined needs of the company and their limited partners, to the ultimate benefit of both, as is the style.
13 And Bob had the vision and took the personal risk and devoted 100% of his energies and hired
all the people that helped him pull the weight.
14 But while Bob excelled at another quasi-law, "management by walking around," conventional
wisdom says Hewlett and Packard invented this, and likely Perkins was the agent who passed this on to
Bob from his HP experience.
Xll
Perkins and Kleiner of venture capital "laws" of any kind. 15 Could Swanson or Jim Treybig, Tandem s
founder, have learned entrepreneurial genius elsewhere than in the hothouse environment of Kleiner
and Perkins? Would Kleiner and Perkins have been launched on a meteoric trajectory without
Swanson s Genentech vision and Treybig s own pursuit of fail-safe computation? Were the "laws"
derived to some extent from what happened at and because of Genentech and Tandem? It is the
province of history to ask not what might have happened in other circumstances, but rather what
happened in particular circumstances, and why.
What happened in known circumstances was Kleiner Perkins launched Treybig and Swanson,
or Swanson and Treybig launched Kleiner Perkins, or in a beautiful convergence of mind, will, energy
and timing they together contributed mightily to lifting America from the "economic malaise"
bemoaned by President Jimmy Carter in the wake of the Arab oil embargo and under the supposed
threat of Asia s "tiger economies."
Whether "laws" were divined only in a post mortem (or, better said, post vita) way, or only
after circumstance rubbed one s nose in them, it is fair to say no one involved ever after forgot these,
and all commenced to apply them in a disciplined way to building engines that power technology
development today.
In the end, Tom Perkins and the venture capital firm he co-founded plainly have been a major
(perhaps after Hewlett and Packard and Intel the principal) tributary watering the Silicon Valley (or
according to one s prejudices the "Silic/one" Valley), to its current green state as the new Fertile
Crescent.
Speaking of water, Tom has always loved the sea and sailing ships. As a fellow fan of Patrick
O Brian s remarkable series of seagoing novels set in the Napoleonic wars, I never envied Tom more
than when he told me O Brian had accepted his invitation to sail with him among Mediterranean ports
along tracks depicted in the books. To Tom s surprise, the author proved impatient at the slow pace
wind power imposed on getting from one destination to another. O Brian forgot what Ursula K. Le
Guin knew and Tom s whole history illustrates:
"It is good to have an end to journey towards, but it is the journey that matters in the end."
May Tom s future journeys continue to matter as much as those so far completed. In the end,
he will be seen to have mattered a great deal. May the wind always be at his back. May the Wind
Maker hold Tom and Gerd, and all whom Tom has loved, in the palm of His hand.
Thomas D. Kiley
Hillsborough, California
January 15, 2001
15 It needs to be said that both had earlier founded or co-founded entrepreneurial companies in
which proto-laws might have been born-Kleiner at Fairchild Semiconductor; Perkins at University
Laser/SpectraPhysics, with simultaneous seasoning from driving Hewlett-Packard toward the computer
business. (Interestingly, Perkins served on the board of Tandem for 23 years, joined the board of
Compaq Computer when it acquired Tandem, and will likely serve on the board of Hewlett Packard if its
pending acquisition of Compaq is approved by shareholders, thus bringing him full circle.)
Xlll
INTRODUCTION by C. Richard Kramlich
From my vantage point, Tom Perkins has made significant contributions to both venture
capital and science.
Tom was tapped by David Packard in 1969 to develop Hewlett-Packard s initiative in
computers. He chose to lead from H-P s strength focusing on scientific and technical applications and
then migrating to genera] business applications.
He & Eugene Kleiner formed their firm in 1972. After some trying early investments, they
developed the style that represents Kleiner Perkins Caufield & Byers today. Genentech caused the
biotechnology revolution & Tandem Computers initiated a new form of computing called redundant or
fail-safe computing. Tom was the chairman of both companies.
Tom found time to be the president & chairman of the National Venture Capital Association
(NVCA). His intelligence, acerbic wit, and sense of adventure help form a man of great depth and
breadth. He is a world-class sailor and understands and appreciates art as well.
C. Richard Kramlich
Senior Partner
CMEA Ventures
San Francisco, California
December 2 1,2001
XIV
INTRODUCTION by Floyd Kvamme
On my first day in venture capital back in March of 1984, Tom took me to lunch in SF. I ll
never forget a comment he made in helping train the newcomer, "Remember, Floyd, all start up
companies have one thing in commonthey all get in trouble. It s how they and you on the board
handle their trouble that separates the winners from the losers." That advice has certainly served me
well-both in its accuracy, in its application, maybe most importantly in its validity.
Tom understood that the CEO had a tough job and that supporting him or her was a critically
important part of our role. He was very much in the "Back em or replace "em" school, but I don t
remember his exact words on this point. He certainly didn t try to take any credit for the successes of
companies he supported; he wanted that to go to the CEO and more often than not he "backed em"
understanding that excessive changes at the top could be ruinous.
A related point is that he never wanted media attention for KPCB (which ultimately did
happen), he always pushed the press and other media to the companies. He had a clear understanding
that our success as a firm was 100% linked to the success of the companies we backed and, thus,
always sought to promote the companies.
Tom has a very wry sense of humor-specific examples elude me, but he was always a great
audience for humor as well. I remember the day Frank Caufield mentioned that a specific presenting
entrepreneur had only one problem~a charisma bypass. Frank had so perfectly captured the problem
that the humor of it caused Tom to burst into incredible laughter.
Tom was a perfectionist. He wanted all the details done right. It showed in everything the
firm did. It had to reflect well-from the office look, to his personal appearance, to his boat projects.
Tom has incredible taste and uses it well.
Tom cared a lot about the profession. He served the NVCA [National Venture Capital
Association] well and helped others understand the importance of the venture capital field. I thought it
particularly appropriate when he was honored by the NVCA for his lifetime achievements in the field.
Floyd Kvamme
Senior Partner
Kleiner Perkins Caufield & Byers
San Francisco, California
January 7, 2002
XV
INTERVIEW fflSTORY-Thomas J. Perkins
"I can t remember at what point it dawned on me that Genentech would probably be the most
important deal of my life, in many terms. The returns, the social benefits, the excitement, the technical
prowess, the fun." (page 24)
Thomas J. Perkins is one of the most historically significant financiers of the twentieth
century-because of the venture capital firm he built, because of the tone he set and the image he
embodied for an entire class of financiers, and because of the deals he closed. Genentech was one of
the most important deals of his life.
This set of interviews is a Genentech-centric view of Perkins s storied life. There is much
more to be said by Perkins about his life. For example, here he only touches upon his years moving
Hewlett-Packard into the computer business, his philosophy of venture capital, the role of Kleiner
Perkins Caufield & Byers in continuing to create new industries, the equal significance of Tandem
Computers in his professional life, his passions for fast cars and sleek sailboats, and his wife and
family. Still it is remarkable how much of his life and ideals are woven into the fabric of Genentech.
Perkins is obviously a big picture guy and a people person. Over the years he has seen and
signed thousands of deals for hundreds of companies in dozens of industries. Even with the most
important deals, as you ll read here, his memories are not about amounts of cash raised and detailed
shifts in governance but rather how those deals changed the relations among people. Some of the most
poignant moments in these interviews are Perkins s insights into the personalities of Bob Swanson,
Kirk Raab and the other people dedicated to the success of Genentech. Perkins never mentions how
much he made on the Genentech IPO; what he remembers best is the excitement that swirled around
that IPO. For various reasons, Roche s impact upon Genentech since 1990 has been a historical
enigma. Perkins here describes it in very human terms, elegantly, as Roche s "good behavior." (page
39)
Readers will note information here not widely known about Genentech s history: Perkins s
prior failed investment in Cetus (page 3); his efforts to alter the initial business plan to subcontract
scientific work so that "for next to nothing we had removed a world class question about the risk"
(page 6); how Herb Boyer broke an impasse on timing of the public offering with his poignant joke
mat "he always votes with his friends" (page 12); and about why Genentech kept the Roche deal quiet
until it closed (page 37).
Perkins claims credit for inventing the financial instruments of junior common stock and
clinical partnerships (page 10). In his own oral history interview, so does Fred Middleton,
Genentech s first chief financial officer. The documentary record, or a frank discussion between the
two, may sort out these competing claims. Most likely, both Middleton and Perkins played key roles at
each stage of moving these vehicles from conception to reality: isolating the need, discovering an
analog, working through the system of details, and converting the plan into actual cash. What is
significant about these claims is not that they are competing, but that two leaders in venture capital
agree that the clinical partnerships and junior common stock are very historically significant. Indeed,
they are.
Venture capital created biotechnology as an industry. Both industries-venture capital and
biotechnology-surged in prominence in the 1980s and 1990s through symbiosis more than
coincidence. Into the 21 st century they may also fade apace. Perkins calls the historical role of venture
capital in pharmacology "an anomaly" (page 50). The history of medicine is replete with examples of
XVI
new technologies coming out of university or government laboratories that only succeeded after being
subsumed into big pharmaceutical firms. Recombinant DNA, likewise, could have, and eventually did,
fit quietly and easily into the laboratory structure of big pharma. In Genentech s case, though, venture
capital created a petri dish upon which the technology of recombinant DNA became an independent
firm from which sprouted an entire industry.
Independence, on many intellectual and financial levels, drove the Genentech founders. These
founders were well aware that since 1958 only one new firm-Syntex of Palo Alto-had succeeded at
integrating all pharmaceutical operations from discovery to marketing. So rather than follow some
extant model for becoming a fully integrated firm, they invented their own business model. Perkins as
Genentech s venture capitalist, helped invent that model. Venture capitalists did not simply infuse
molecular biologists with cash and their willingness to risk it. What venture capitalists do well, that no
other types of financier really try to do, is capture the equity in a technical idea. Genentech s
independence was rooted in the founders firm belief that they should hold the equity in the brilliance
of their sciences. Perkins encouraged that. And Genentech s independence was created and
maintained, on a more prosaic level, by the novel alliances they forged and by their ability to invent
new financial instruments.
David Packard, the lion of Silicon Valley, joined Genentech s board early on at Perkins s
request. Perkins relates Packard s comment that his involvement with Genentech taught him nothing
about DNA, but that he "learned an awful lot about financing." (page 21). As much as it was a hotbed
of science, Genentech was a hotbed of financial innovation. Bob Swanson and Fred Middleton, both
trained in finance, were at the tops of their games and worked with only the best and the brightest
among their colleagues in law and banking. But at Genentech, on matters of finance and governance,
Perkins most likely got the last word.
The San Francisco Bay opens northward toward Tiburon in the expansive view from Perkins s
present-day office in the KPCB suite atop Embarcadero Center. Other than floor-to-ceiling windows,
Perkins s office is sparsely decorated, surprisingly empty of the Lucite tombstones of closed deals that
dot most venture capital offices. It is also largely empty of paper, and Perkins noted that he had a
tendency to toss out any old documents that did not need to go to warehouse storage. We did three
interviews there on Wednesday mornings in the months following the 1 1 September 2001 terrorist
attacks on New York. Perkins was polite enough to not gaze thoughtfully out of the windows at the
sailboats gliding by below, wishing he was captaining one instead, though we did occasionally pause
in thought at airplane noises.
Kathy Jewett, Perkins s long time assistant, scheduled our interviews then held on to the
growing stack of telephone messages until we were done. Tom Kiley, Genentech s former chief
counsel, asked some of Perkins s friends in the venture capital business to write introductions to this
volume, and all responded enthusiastically. My thanks to them for their help, and to Tom Perkins for
such engaging and pleasant conversations.
Glenn E. Bugos, Ph.D.
Principal Historian
The Prologue Group
Redwood City, CA
October 2002
XV11
Biography
Thomas James Perkins
Thomas J. Perkins was born on 7 January 1932 in Oak Park, Illinois, the son of Harry H. and
Elizabeth H. Perkins. He grew up in White Plains, New York. In 1953, he earned his bachelor s degree
in electrical engineering from the Massachusetts Institute of Technology. Upon graduation he spent a
year on overseas assignments with Sperry Gyroscope Company repairing airborne armament guidance
systems. In 1957, he earned his master s degree in business administration from Harvard University.
Perkins moved to the San Francisco Bay area to work with the Hewlett-Packard Company, first
as a machinist and then as western sales manager. Perkins quit to spend a year as consultant with Booz,
Allen & Hamilton. In 1961, David Packard asked Perkins to join Optics Technology, a new company
that Packard and Hewlett personally had backed. Three years later, Perkins resigned from Optics
Technology following a boardroom battle with its founder.
In 1965, Perkins founded University Laboratories, Inc. along University Avenue in Berkeley. He
built the company based on various patents he had earned in the manufacturer of self-contained,
adjustment-free, low-cost, shock- and water-resistant helium-neon gas lasers. His lightbulb-like lasers
found wide industrial applications. He remained chairman of University Laboratories until 1970 when it
was merged into Spectra Physics, Inc. Perkins joined Spectra Physics as a director, and Spectra Physics
became one of the world s leading laser companies.
Also in 1965, Perkins returned to Hewlett-Packard as the business manager of its corporate
research laboratory. One laboratory project was a minicomputer which became the HP 2116. In 1966,
Packard asked Perkins to serve as general manager of Hewlett-Packard s new computer division. The
Hewlett-Packard computer division quickly became the largest and most profitable business line within
the company, shadowing its traditional instrumentation divisions. In 1970, during David Packard s tour
of duty as Deputy Director of Defense in Washington, D.C., Perkins served Hewlett-Packard as director
of corporate development, reporting directly to William Hewlett. Perkins left Hewlett-Packard in 1972 to
become a venture capitalist.
In the summer of 1972, Perkins and Eugene Kleiner founded Kleiner & Perkins and had raised
their first fund by January 1973. The $8 million fund, driven largely on investments in Tandem
Computers and Genentech, showed a 41.5 percent compounded gain after its first decade. In 1978 they
reorganized their firm by adding Frank Caufield and Brook Byers as general partners, and raised their
second fund, of $15 million. In 1980 they raised a third fund of $55 million. Upon the raising of the
$150 million KPCB IV fund in 1986, Perkins nominally retired from the senior partner role. Kleiner
Perkins Caufield & Byers, with offices in Menlo Park and San Francisco, remains the most prominent
venture capital firm in Silicon Valley, and the most successful.
Perkins became chairman of Genentech, Inc. in April 1976 when his venture fund made the first
investment in Genentech. He remained chairman of its board of directors until February 1 990, when
Genentech founder Robert Swanson assumed the chair. Perkins continued to chair the executive
committee of the board, and remained a Genentech director until March 1995. This interview deals
primarily with his contributions to Genentech.
Perkins also served as chairman of the board of directors of Tandem Computers Inc., Acuson,
Inc., Alliant Computer Systems, and twelve other high-tech firms that he helped found. He also served as
xvm
a director of Compaq Computers, News Corporation Limited, Corning Glass Works, Home Health Care
of America, Inc., Collagen Corp., LSI Logic Corp., Hybritech Inc., Econics Corp., and Vitalink
Communications Corp. He is currently on the board of directors of the Hewlett-Packard Company.
Perkins served as president of the Western Association of Venture Capitalists in 1975, and as
president and chairman of the National Venture Capital Association from 1980 to 1982. He has been a
trustee of the San Francisco Ballet since 1980.
Perkins is an avid sailor. He belongs to the New York Yacht Club, designed the yacht
Andromeda La Dea with ship designer Fabio Perini, and restored the Mariette, a 1915 Nathanael G.
Herreshoff gaff schooner which he docks in Antibes. He assembled one of the world s great collections
of supercharged roadsters from the 1920s and 1930s, won numerous awards for his restorations, and
served as president of the American Bugatti Association from 1983 to 1985. He lives on Golden Gate
Avenue in Belvedere, California. He and his wife restored Plumpton Place in East Sussex, which is
listed in the Domesday Book, and where they recreated the rose garden designs of Gertrude Jekyll.
He married Gerd Thune-Ellefsen on 9 December 1961. They have a son, Tor Kristian, and a
daughter, Elizabeth Siri. Gerd died on 20 August 1994 following a battle with lymphoma. Perkins was
knighted by the King of Norway for his role in the reconstruction of a historic site near Hamar, Gerd s
birthplace in Norway. Perkins was married to best-selling novelist Danielle Steel from March 1998 to
August 1999, who dedicated to him her novel The Klone and I (1999).
Publications:
"Cruising with Patrick O Brian: The Man and the Myth," Latitudes 8 (August 2000).
Classic Supercharged Sportscars (Corte Madera, California: Paradise Press, 1984).
Experiments in Physical Optics Using Coherent Laser Radiation (Belmont, Ca.: Optics Technology,
1962).
"A survey of two-phase servomotor amplifiers," Thesis, MIT Department of Electrical Engineering, 1953
(with Jan Diedrik Otten).
INTERVIEW WITH THOMAS J. PERKINS
[Interview 1: October 24, 2001] ##
[San Francisco, California]
Perkins at Genentech. from 30.000 Feet
Bugos: Perhaps we could begin this interview by you giving some structure to your experience with
Genentech, starting with the formal positions you held there, going through the list of your
major accomplishments on Genentech s behalf, and finishing with how you think historians
should or will portray Genentech and venture capital. So if you would start with your resume,
please.
Perkins: Well, [Eugene] Kleiner and I started the venture capital partnership in 1972. Genentech was
one of the investments in the first partnership. There were two major investments in that first
partnership, and they share a common theme. Tandem Computers and Genentech had the
common element of being founded by employees of the partnership. Jimmy Treybig was a
limited partner and an employee of the partnership, as was Bob Swanson. Both companies were
unusual in being done that way, and none had been done that way before-in the venture capital
industry as a whole.
Kleiner and I were the original financial backers of Genentech, and I became the chairman of
the board from the beginning. Really from before there was even a company: just Bob
Swanson, Tom Perkins, and a checkbook. We ll get into how all that worked. I remained
chairman of the board for about twenty years, I guess. Eventually Bob Swanson became
chairman of the board at the time of the merger/investment from Roche. I left the board not
much longer after that and have not been involved with the company since. That s it from
30,000 feet, [laughter] Maybe we should start with: What was venture capital like in the
1970s? Why did we hire Bob Swanson? How did the idea for Genentech come about? Does
that sound right?
Bugos: Sounds perfect.
## This symbol indicates that a tape or tape segment has begun or ended. A guide to the tapes
follows the transcript.
First Kleiner & Perkins Partnership
Perkins: These days venture capital is a very big deal, though somewhat deflated at the moment.
Billions and billions of dollars are invested in venture capital. It s hard to imagine that there
always wasn t venture capital. But back in the early 1970s venture capital was almost an
unknown business.
Kleiner and I started Kleiner & Perkins. We originally started in Menlo Park, and then after
about a year moved up to San Francisco because we thought it was more central to what was
going on-which may or may not have been true, but we both like San Francisco. We had only
a part-time secretary, a young lady who worked for us from just nine until twelve, because the
phone never rang. If it did we d answer it ourselves. You can t believe how quiet it was. Back
then you could have put all the venture capitalists in America into this officewhich is maybe
twenty by twenty feet. I m not exaggerating. I could name all their names, even now. Just a
handful of people, in New York, a couple in Chicago, a few out here. The total amount of
money in the industry was certainly less than 200 million dollars. New money was being raised
at the rate often, twenty million dollars per year. So we re talking about a cottage industry.
Very small.
Kleiner and I, with our first Kleiner & Perkins partnership of 8 million dollars, were the
largest venture capital partnership in the world. It s just hard to imagine how different it was.
Of course, Kleiner and I had a lot to do with changing it. Tandem and Genentech and one other
deal with our first partnership were very successful, so we were able to raise additional money
and keep going. Over the years, Kleiner Perkins has been the most successful venture capital
partnership. Well, I can go beyond that. It s been the most successful financial institution in
the history of the world. We might have to modify that statement if the Medicis and the
Rothschilds make their data available. But until they do, I ll stand on that statement. We ve
had returns of about 40 percent per year, compounded, for coming up on thirty years next year.
Nobody else has done that well.
Genentech was one of the key ingredients, not only to our success, but to the success of
high-tech venture capital in America. And to its success throughout the world, because it s
been copied everywhere else. Genentech accomplished a lot, not just scientifically, but in the
business world as well.
Genentech was founded in 1976. Tandem had been founded in 1974. Kleiner and I felt that
we needed help in finding deals, creating deals, getting the business going. We had hired two
employees to help us, though they didn t overlap. The first was Jimmy Treybig, who had
worked for me at Hewlett-Packard. He and I put together this company called Tandem
Computers. It was a mixture of our ideas. He put more into it than I did, but I was pretty
involved with it technically. As with Genentech, we couldn t find anybody else to invest in
Tandem. So Kleiner and I backed it 100 percent, in the initial phase at least, and got it going.
By the time we got around to Genentech, Tandem Computers was clearly going to be a success.
How big we didn t know, but it was on its way to an initial public offering. We were
encouraged by that formula.
Hiring Bob Swanson
Perkins: So we hired Bob Swanson, whom Eugene Kleiner had known through venture capital circles.
Bob had worked for Citibank in their venture capital operation and he and Eugene had been
involved in a failed deal. Eugene had been impressed with Swanson s ability to think straight
and get things done. So when Bob was looking for a new position, we hired him. That would
have been about late 1974. We were in Embarcadero Center Two then, on the top floor.
Bugos: Did you have any other employees?
Perkins: No. Well we had the secretary and a bookkeeper. Very small operation. But Kleiner Perkins is
still a small operation. We don t have huge numbers of people.
Bob worked on various deals for us. And, I have to say, not very successfully. Eugene, in
particular, was increasingly unhappy with Bob. He didn t think much was going to be
happening.
Kleiner & Perkins Invest in Cetns
Perkins: About that time we had made an investment in Cetus. To be kind to Cetus, I d have to say that,
in my opinion, it was a high-class fraud. Soon after we made that investment we became very
disillusioned with the principals there. We felt that nothing was going to come of it. Their
original business plan was to automate biological laboratories. It was not to do genetic
engineering of any sort. But to make an effort to save our investment in Cetus, we put Bob
Swanson on the case, to see if he could come up with something. He started spending as much
time as he could on that company, though they wouldn t let him spend much time at their
company.
He arranged a luncheon with Professor [Donald] Glaser of U.C., a Nobel Prize winner, the
management of Cetus and, since I was available, me. We met to see if Glaser could inspire the
people at Cetus to do something that would amount to something. At that lunch, Glaser covered
the horizon with all kinds of ideas. At one point he mentioned that he thought it might be
possible to do-I don t think he used that term-gene-splicing. It had never been done before,
but he was aware of the work that professors [Herbert] Boyer and [Stanley] Cohen were doing.
He just sort of rambled on about it.
We became very interested in that gene-splicing-all of us, Kleiner, Swanson and myself.
We tried to encourage Cetus to do it. Bob tried very hard. I proposed to Cetus that we set up a
separate division of Cetus, to do that, and put Bob in charge of it. They wouldn t hear of it. It
was absolutely rejected. So we reached a dead end with Cetus. Kleiner had kind of reached a
dead end with Swanson, so we advised Bob that he should seek employment elsewhere.
Bugos: Can I interrupt here? How big were you into Cetus? Was it a major investment for you?
Perkins: Well, of course, we didn t put much into anything in those days. It was probably half a million
dollars. Which was a big deal in those days. It was enough that we were concerned about it.
The problem was that I think we had been conned, by doctors [Ronald] Cape and [Peter] Farley,
into not only investing but investing at too high a price. The morning after, so to speak, we
didn t think this thing would ever get us an investment return. We were completely
disillusioned.
Swanson and Bover Found Genentech
Bugos: OK. So, Bob you let go?
Perkins: Yes and no. We let him go, but he didn t leave. He was still there in the office, which we said
was fine. At the same time, literally, he began to explore gene-splicing with Boyer. This is
well documented, their ten minute meeting, but I ll tell you from my perspective.
So Bob is sort of looking for another job. He told me he really planned to get something
going in this field of biotechnology. That s what he really wanted to do and he asked me: what
did I think? If he could get something going, would I be interested in helping him do it, both
with my time and money? I said, "Yes, I would." He was a little encouraged, so he sought out
Herb Boyer whom I hadn t met yet. They had what has become a very famous meeting. It was
supposed to be ten minutes of Boyer s very busy time. Bob met him, just the two of them, they
went out to have a beer, they kicked the ideas around. Boyer kept saying it s ten years of basic
research and it might work, but it s far in the future. Swanson kept asking why? why? why?
And he was able to bring Boyer along to the point of view of: "Well, maybe. Why not?
Maybe we can get going on this quickly."
Initial Financing
Perkins: A week or so after that they had put together the nucleus of a business proposal to do genetic
engineering, Bob brought it to me for financing. It was very conventional, in that I would put
up the money, they would hire the people, and it would be a straightforward venture. I took the
view that the technical risk was so enormous. I remember asking, "Would God let you make a
new form of life like this?" I was very skeptical. I said that I would agree to meet with Boyer.
He came in that same week, and we sat down in our conference room for about three hours. Of
course, I have a background in physics, electronics, optics, computers, lasers. Biology was
never a strength for me. I really didn t know what kind of questions to ask. So I said, "Let s
just go through it, step by step. Tell me what you re going to do. What equipment you ll need.
How will you know if you ve succeeded? How long will it take?" I was very impressed with
Boyer. He had thought through the whole thing. He had an answer for all those questions-
you ll need this equipment, these basic chemicals, and take these measurements, and on and on.
I concluded that the experiment might not work, but at least they know how to do the
experiment.
Risk Reduction in the Business Plan
Perkins: I still felt the risk was stupendous. The next day I got together with Swanson, and I took the
view that I m willing to go along with this thing but that we ve got to figure out a way to take
some of the risk out of it-something instead of me giving you all of the money, then you
renting the facility, buying the equipment, and hiring the people. With that approach, you ll
have spent maybe a million dollars by the time you get to actually performing the experiment.
Then if it doesn t work, it s all over and all that money is lost. "Can t we figure out some way
to subcontract this experiment to different institutions each of which already had part of these
capabilities?" Nobody had all of the capabilities, that was very clear. In order to give some
incentive to do that, to subcontract the work, I said I would be willing to finance the thing in
phases, to put up less money up front. If this thing starts to work then I ll put up more and more
money at higher and higher prices, and you and Boyer will end up owning more of the company
than if we just do it the conventional way. I ll want to own most of the company if I m going to
take all of that conventional risk. Swanson thought that was not a ridiculous suggestion. He
went back to Boyer and a few days later they had come up with three institutions that could do
this work.
Subcontracting the Research
Perkins: Then we entered into a long series of negotiations with those institutions. With hindsight, we
should have negotiated longer and harder, because it led to incredible patent disputes. Even as
we speak there s a jury trying to decide whether the City of Hope is owed another four hundred
million from Genentech, based on that very original deal that we put together. In my opinion,
they are not owed a penny. Anyway, that s getting head of the story.
So the three institutions were the University of California in San Francisco (the U.C. medical
school), the City of Hope medical research foundation down in southern California, and
Caltech. The U.C. component was to involve Herb Boyer s expertise in splicing, or opening
and re-closing plasmids in bacterial hosts. City of Hope had technology to synthesize genes
using just analytical chemistry techniques, not biotechnology in any shape. There were two
groups in America that could have synthesized the geneat MTT under professor [Har Gobind]
Khorana and then doctors [Arthur] Riggs and [Keiichi] Itakura at the City of Hope. Caltech had
the ability to test for results.
Swanson did most of the contract negotiations with these institutions. I was involved just in
checking and agreeing to it. This is a whole story in itself that could best be told by Tom Kiley,
because he was deeply involved in each negotiation. However, I did go down to visit the City
of Hope and meet with their management and with Riggs and Itakura. First of all to satisfy
myself that they could do the work if we gave them the contract; secondly, to persuade them to
do it. They had other things they could have done instead. We wanted their cooperation.
Proof of Concept
Perkins: So Genentech, which had been named and incorporated by then, was basically Bob Swanson, a
part-time secretary, a checkbook, and these contracts. Swanson had moved out of our office
into a small office in the Bank of America building. We decided to do a proof of principle first,
with the smallest gene that, we hoped, could be expressed. It might have some use but basically
it would be a proof of principle. It was a gene to express a protein called somatostatin.
Somatostatin has not yet found a commercial use, but it could some day. It wasn t an utterly
useless exercise. The gene went together more or less as planned and was delivered up to UC
where it was spliced and expressed, then tested. And it worked. There was not much hoopla
about that.
Now, I neglected to say how much money was involved in all this. The initial experiment
was basically done for a hundred thousand dollars, which was the money that Kleiner and I had
put in originally. In view of what happened subsequently, that just seems so small. Almost a
joke. But that was enough to remove much of the risk from the entire venture. It was a perfect
example of Kleiner s and my strategy to try to structure deals so that the initial money got rid of
the risk, whatever it was marketing, technology, people. The subsequent money could be used
to develop the venture. You just couldn t have a better example of doing it that way than
Genentech. For next to nothing we had removed a world class question about the risk.
Additional Investment in Insulin
Perkins: Then we put in additional money. Swanson and I reached an agreement. Fifty thousand more
went in, with the agreement to put in something like seven to ten thousand a month after that
was used, if needed. Swanson thought that significant success could be achieved for that
amount of money. I thought they would overrun the budget and that we d end up owning more
of Genentech. We were both right. They did end up overrunning the budget some, and we did
invest more to get more, though less than another hundred thousand dollars to develop insulin.
Insulin had always been Swanson s primary target. Somatostatin was just a way station on
that quest. He and I both agreed on this. We didn t have to do market research to convince
ourselves that if we could make human insulinliterally human insulinwith this genetic
engineering approach that the market would be tremendous. Whether we developed the product
ourselves or licensed it, it would be a very valuable thing.
So the second gene was put together. It took much longer, because it was three times the
physical length, in its DNA content, of somatostatin. But Riggs and Itakura did it, then it was
expressed. Now we had a big thing to talk about. The announcement of the insulin was a world
news event. The day we announced it was the headline in the San Francisco Examiner. That
woke up the world to what we now call genetic engineering. It put Genentech on the map. It
went from essentially nothing to a very interesting and viable enterprise. Thus began the real
fundraising for Genentech. We were able to raise money at much higher prices. So high that
Kleiner and I made only token investments ever after, because Kleiner & Perkins already had a
significant ownership of Genentech. Fundraising went on for years, and ultimately added up to
billions, in countless rounds, all of which I was involved with, until finally I left the board.
Building Genentech s Scientific Culture
Perkins: We started renting facilities, outfitting them, expanding them, through a long series of moves, in
the South San Francisco industrial park.
##
Perkins: Over many years we became the largest employer in that area. It was our world headquarters
and our laboratories. But the physical plant is not the most interesting part of the story.
Bob Swanson deserves tremendous credit for putting Genentech together in the first place. I
think the next most important thing he did was to realize-and Herb Boyer helped him come to
this conclusion-mat to build a world-class scientific research corporation he had to hire world
class scientists. To do that he had to establish an academic-like environment, but even better
than an academic environment. In academia, the researchers spend a huge amount of their time
writing research proposals to get funding. Genentech eliminated that, while encouraging some
pretty basic work. In the early days, everything Genentech needed to do commercially was also
basic work to the whole field. It appealed to academicians-professors, scientists-even though
it was commercially oriented. Bob encouraged them to write and publish scientific papers. Of
course, we had to file our patents first and that took some discipline that the scientists hadn t
been exposed to, though they accepted it pretty gracefully. Over the years, Genentech scientists
have published as many papers as some of the leading research institutions in the field. To this
day, anybody working in the field has to reference Genentech s underlying work. So the
scientific excellence of Genentech is directly attributable to Bob Swanson.
Where do you want me to go with this next?
Swanson s Early Business Affiliations
Bugos: Can I go back and ask you to fill in some of the early parts of the story? Was Swanson
officially let go?
Perkins: Bob was probably officially unemployed for two or three weeks. Physically he never left. I
think that his termination lit the fire under him to really get on with something better. It
definitely cooled the relationship with Kleiner, but Bob and I remained pretty good friends.
8
Hugos: Swanson formed an exploratory partnership with Boyer about January 1976. Was that
something Treybig had done in starting Tandem Computers?
Perkins: No. With Treybig it was much more direct. We decided to do Tandem, we incorporated
Tandem, and spun Treybig out into Tandem. I was chairman of the board. We did all the
financing for that. I m still somewhat involved with that, because it got merged into Compaq,
another company we financed. I m on the board of Compaq, and it s probably going to be
merged into Hewlett-Packard. I started the Hewlett-Packard computer business. All these
things tie together. I ll probably be a director of the combined companies.
Bugos: So the three-hour meeting you had with Swanson and Boyer. Had they put together a business
plan for you to critique?
Perkins: No. It was more a one-page with rough estimates of how much it would cost.
Bugos: But clearly then, their idea was to build the laboratory, hire the people, spend the million
dollars.
Perkins: Yes. And as I said, I was able to change that thinking.
Patent Rights
Bugos: OK. Boyer and Cohen had already filed for their fundamental patent. Stanford and UC were
talking about licensing it, though it wouldn t actually issue until 1980. Was getting rights to
that patent a big deal to you in terms of allowing Swanson and Boyer to move forward with
their business plan?
Perkins: It was a big deal. But we weren t too worried about it. I knew the patent and licensing people
at Stanford, and they were in the business of licensing patents. So I felt getting a license would
not be a problem.
Bugos: You had some indication that they weren t thinking about an exclusive license but would
license it broadly.
Perkins: We asked for, not expecting to get, an exclusive license. We were not surprised that we didn t.
But remember, our own patents also became very valuable.
After two or three years of work at Genentech we had some strategic questions to ask
ourselves. Should we attempt to use our patents as a barrier to other companies? Or should we
license our patents broadly? I persuaded Swanson to follow the licensing strategy. Otherwise,
our technology was just so absolutely basic that we would be in endless patent litigation. We
would spend every resource defending patents and it would be years before we had an income
stream from the products to pay for that. It would be better to license and shoot for royalties.
On the license with Eli Lilly for the manufacture of insulin, there wasn t too much
disagreement between Swanson and myself on that one. There was some talk, should we do it
ourselves? Could we do it ourselves? But the amount of money required was just so huge. I
felt that from the perspective of building value in Genentech, that the royalty would be just as
good as doing it ourselves. And we did write a rather attractive royalty agreement, I felt. Even
that was locked into endless litigation. A patent is simply an invitation to a lawsuit anyway.
I m very cynical about that.
Looking back at Genentech, I honestly think that if we had to do it all over again we d do it
the same way. I don t think that we made a single strategic error. We might have done a few
things different tactically, and we should have spent more time tightening all these agreements,
though they seemed so tight at the time. But I still think the basic strategy of the way we did it-
subcontracting the experiments, then licensing Lilly, then developing our own products and
capabilities, then merging, selling to Roche, then the Roche spinout to keep it a public
company. I don t think we could have done it better. That s why we re talking. It was done so
well. And continues to be a major player in this whole industry. The major player.
Earlv Financial Engineering
Bugos: You mentioned the importance of licenses and royalties. After the Lilly license and the Kabi
license, in the summer of 1978 you did a business plan exercise that was issued in December of
1978. It said that you were going to become a fully integrated pharmaceutical company. Prior
to that had you expected to be a research-and-development-driven, royalty-based, think tank of
a company? What was the business plan prior to the FIPCO plan?
Perkins: The business plans have to be around somewhere. It would be interesting to see, in retrospect,
what they did say. My recollection is that we had planned as a first step to license and as a
second step to manufacture. That was the plan we executed. Genentech delivered on its
financial expectations and was, of course, the darling of the investment community.
There had to be a lot of financial engineering in this thing as well. With the exception of
some royalty income that was beginning to develop from Lilly, there was no income at all, only
huge development expense. If you looked at the P&L, the profit and loss statement, there was
no income, no sales. Tremendous expense, big loss, and that was that. It dawned on me-first, I
guess-that that was not a viable financial model. Subsequent world events with the Internet
have changed that. But in those days, a company was supposed to make earnings, or at least
have reasonable prospects of making earnings fairly soon. And we had to fund clinical trials
through the Food and Drug Administration. After all, we were making Pharmaceuticals. We
were lightning fast in doing ittwo or three years on our products, though typically five to
seven years and hundreds of millions of dollars is required to get a new drug on the market. I
didn t see how we could take Genentech public and have a decent stock price if that s what our
P&L was going to look like. Gallons of red ink for years. And I think I was right about that at
the time.
10
Clinical R&D Partnerships
Perkins: So I invented this idea of the clinical R&D partnership. It was a financial invention; I ve got
some patents on some technical things. It was an extremely simple idea, but it transformed
Genentech s P&L in a very basic way. We separated out the clinical trials, which is the largest
expense in any drug development company. We set up a partnership that would fund the
clinical trials, and that funding came back to Genentech. So the profit and loss statement is
transformed. At the top line, you have hundreds of million of dollars coming in as revenue.
Then the company does the clinical trial under a subcontract, and has that expense. It
essentially breaks even on that whole transaction. It doesn t make any money, but it doesn t
lose any money either. With a stroke of a pen, I was able to change the P&L from just horrific
red ink to break-even.
We did a series of these partnerships. The reason they worked was that if the clinical trial
was successful-and we had enough insight into the drugs to know that it would bethen the
company had the right to reacquire the commercial interest of the partnership in return for cash
and stock. These worked very well, until some years later the Securities and Exchange
Commission decided it was too aggressive, [laughter] It worked at the time we needed it to
work. I personally invested in these partnerships. They were very lucrative, and everybody was
happy.
Junior Common Stock
Perkins: I had two financial inventions for Genentech. The other was the invention of junior common
stock, which was also subsequently outlawed by the Securities and Exchange Commission,
[laughter] Genentech went public and became the hottest stock offering in history to that time.
Absolutely famous. We didn t have a clue how to price the stock. We knew it was going to be
a hot issue, we knew it was going to be oversubscribed. But Swanson, the board, the
management, the investment bankers-we were all caught somewhat by surprise. We could
have sold less stock at a higher price. It came out at thirty-five, shot up to eighty-five, then
drifted back down. But that spread brought us world wide publicity. Everybody knew about
Genentech. I had cousins I had never heard of that were calling me trying to get in on that deal,
[laughter] It was fantastic.
However, it established the idea that you could start a new biotechnology company, raise
obscene amounts of money, hire good employees, sell stock to the public. Our competitors
started doing all of that, so much so that it became an impediment for us to hire and retain
employees. We started to lose employees to other biotech startups. Our employees had
originally acquired our stock as common stock. We were able to justify a ten-to-one difference
in price. So if the preferred stock was at thirty-five a share, then employees got common at
three-fifty a share. No problem. But you can only do that once. Once it becomes a public
stock, the preferred shares convert to common and everyone is on the same platform. So how
11
are we going to continue to attract these people? Continue to hold these people? It was a big
problem.
So I said, let s create a new kind of stock. We ll hobble it. It won t have voting rights, and
most important, it won t have liquidation rights. In the event of a collapse or, more importantly,
in the event of an acquisition or merger, it will only have value after all the other stock has been
redeemed. We got an opinion from the accountants that this stock was only worth one tenth of
what the regular common stock was worth, and we called it junior common stock. It would
convert to ordinary common stock in case of certain events. We picked specific events into the
future such as: Genentech had to be earning a certain amount, or some product had to be
achieved. Not events with great certainty, but events they had to work towards which gave a
risk factor to it. By diddling that formula, over about four years, we were able to use that form
of stock, just as we had in the beginning, to attract and hold key employees.
We were the first company to ever have such a thing. My name and fingerprints were all
over it. We were very careful to run these plans through the SEC. They approved it. We never
had to retract any of that stock. However, the idea was stolen by all of our competitors and so
grossly abused that the SEC made most of our competitors retract and eliminate those stock
plans. But not Genentech. We were prevented from issuing that stock again, but we could play
out what we already had in place. That was junior common stock.
Pre-EPO Equity Structure
Bugos: From the S-l registration it looks as though all the preferred shares had converted into common
well before the IPO because of automatic conversion at a revenue milestone. Today, most of it
converts at the IPO. Was that the case?
Perkins: Going up to the IPO there was preferred stock and common stock. Employees holding the
common, all the investors holding preferred which then converted to common. The expected
way that the preferred stock would become liquid was that it would convert to common in a
registration. The absolutely planned exit was an IPO and registering that stock with the SEC.
There may have been other events thrown in. Most preferred contracts have other redemption
clauses. I don t even know that we put those in, because the definite plan was that it would
convert to common. I think Kleiner and I invented that also-the preferred to common
conversion going way back. Kleiner & Perkins used that in every company we financedthe
preferred/common route-years before others did it. The reason was to be able to offer
employees very inexpensive shares. That was the only reason to do it. Kleiner and I pioneered
that. There was no SEC problem in doing so, it just hadn t been done before. It took our
competitors a while to figure that out.
Bugos: Who was of counsel to you in helping you nail down details like that?
Perkins: I honestly can t remember. We used Pillsbury, Brobeck, Sonsini; not so much Cooley
Godward. Lawyers spread those ideas, but it took some time for these ideas to spread.
12
Bugos: Let me ask about another anomaly in the equity structure. You only did one series of preferred
stock, a series A, at increasing valuations. Today most VCs do a series A, series B, series C,
and so forth. What was the idea behind only doing one series of preferred stock?
Perkins: Go with what worked. Then you don t have to renegotiate everything. Also, most of the
investors were just buying more of what they had. We had strong investor loyalty. I don t think
there was anything too sophisticated about that.
Look, I m pretty proud of those two inventionsthe junior common stock and the
partnershipsbecause they let Genentech stay on the cutting edge for years. There was no
quarrel, incidentally, with Swanson, on any of this. Bob relied pretty heavily on my financial
judgment.
Quarrel with Swanson on IPO Timing
Perkins: The only major quarrel we ever had was over when to take the company public. I felt very
strongly that we should be the first, that it would nail down Genentech s position as the leader.
It would be horrible if a flaky outfit like Cetus were to be first. Swanson and I really quarreled
about this. He knew that we needed to be public, but it was a huge amount of additional work
for him. Not for me. My telephone wasn t going to ring from irate investment analysts and
shareholders. His was, and he knew that.
We had a classic board meeting. There were just three directors, Swanson, Boyer, and
myself. Swanson and I were in a very heated discussion. Finally we both turned to Boyer and
asked, "What are you going to do?" I wanted to vote on this thing, get moving. Boyer said, "I
always vote with my friends." [laughter] In other words, no answer. Just go back at it. So we
did. We broke up that day without a decision.
Bob and I got together for lunch the next day and I asked, "What do you think of Cetus?" I
got a blast from Bob: "They re the flakiest of the flakes." I asked, "How would you feel if they
got all the world publicity from being the first public biotech company?" That did it.
Otherwise we would have been second.
It s just hard to recapture how exciting it was on that initial public offering. It was a world-
class undertaking. We went all around America, we went to Europe, drumming up support for
that IPO. If we had been second, it would have been nothing compared with that. That IPO
defined Genentech. We were the hot guys, with the best this, the most aggressive that, the best
science, the best patents, the best financial relationships, the best publicity. It was all true.
Liquidity As an Issue
Bugos: Where were you with your fund at that point? Were you looking for liquidity? Was that
driving your interest in going public?
13
Perkins: October of 80 we went public. I think we had just started our second fund.
##
Perkins: From our point of view, the Kleiner Perkins point of view, liquidity was not a concern. We had
achieved liquidity in other investments. Tandem Computer went public in 1976 or 1977. We
had returned our investments to our limited partners ten times over. We had no trouble raising
our second fund. So liquidity wasn t a factor at all.
Kleiner and I used to make a point with the entrepreneurs that we were going to finance.
The decision to take a company public was a huge event in the life of a company and we, the
partnership, were not going to exit the deal at that point. You can t get rid of us by going
public, [laughs] Going public is important, but it s not by any means the end of the process.
We will stay with you, we will help you, we won t just dump that event on you then leave.
Kleiner & Perkins: Commitment to Ventures
Perkins: There was always concern on the part of the entrepreneurs that when we distribute our shares
that the stock price would collapse. We had been so good at doing that over the years. We ve
distributed slowly, we ve done it in a good way. Even though we distribute our shares, we will
stay with the venture for a long time. John Doerr is still on the board at Sun, I m still on the
board at Compaq, Frank [Caufield] is on AOL Time Warner. We just hang in there. It s hard
to get rid of us. We want to have a credible story that we build big businesses. We know how
to do it. When you sign up with Kleiner Perkins we re in it for the long haul. That was true
with Genentech. Swanson didn t want me to leave, and we didn t leave when we took the
company public and we distributed our shares.
Hugos: Some of the co-investors with you on subsequent rounds were limited partners in your venture
fund-like the Hillman family.
Perkins: That s right. Of course, that was enormously profitable for the Hillmans. I remember bringing
Henry Hillman out here and showing him around Genentech. He was looking through
microscopes and loving it all. Corning was another investor. The quid pro quo for the Corning
investment was that I would go on the board of Corning. Then when they sold, I left. I didn t
feel like I had a long term commitment to them beyond the interest in Genentech.
You know, if we are going to talk about specific rounds of funding, I am going to need to
have records. There have just been so many deals in so many companies over the years. It s
hard to keep them all straight. Not just with Genentech, but with everything else. There have
been about three hundred Kleiner Perkins companies.
14
Hybritech
Bugos: I m not sure I need to know details. Just how things were different then from today.
Perkins: Well, it couldn t be more different, could it? We duplicated the whole Genentech thing in a
company called Hybritech. If it worked once, let s do it again. There s a lot of parallels.
Everybody knew what Swanson had done with Genentech. Brook Byers was very interested in
biotechnology. He heard about this monoclonal antibody development, which was given to the
world by Oxford or Cambridge. He heard of a scientist, Ivor Royston, in San Diego, who was
working on it. He went down and we set up a company, with Brook as president, called
Hybritech. We negotiated the deal at the airport, on the back of a napkin so to speak.
Subsequently, [Howard E.] Ted Greene approached us with the identical idea. He was going to
start a company to do monoclonals, and instead we talked him into becoming president of
Hybritech. So we got rid of a potential competitor and picked up a superb executive. Then we
did all the same thingsthe clinical partnerships, taking it public, the junior common stock. We
subsequently sold it. For a long time it was the best investment we ever made in terms of
absolute dollars returned. It was way over a billion dollars. In those days that was a lot of
money.
Focusing Genentech s Strategic Vision
Bugos: Did you ever think of bringing monoclonal antibodies into Genentech?
Perkins: No. Genentech was up to its chin doing what it was doing. Swanson knew all about it, and
there were research agreements between the two companies. But Genentech was too busy with
its own technology. There was not a conflict on that one. Even now, we sort of check with the
entrepreneur of company A before we do company B, to make sure that company B is not going
to be too offensive to them. So we would have talked with Swanson before we started
Hybritech, because that would have been our policy. We never fund directly competitive
enterprises, though sometimes they get fairly close.
Bugos: About the time you started Hybritech, interferon was the hot new project at Genentech, and
Genentech was beginning to diversify its efforts in a variety of areas. You had the option of
going in many directions or focusing on protein production through recombinant DNA. How
much discussion was there at the time on whether to diversify into new areas?
Perkins: Quite a bit. We were aware that there was the whole field of agriculture to explore. I went to
meetings where we talked about the differences between plant and animal DNA. We made the
conscious decision that we just couldn t do that. It s just too different. Though we did discuss
it fully.
We got much closer in the field of animal and veterinary products. We did develop bovine
growth hormone. I took a very strong position that we should not develop that at Genentech;
that we should license it. We were already running flat out. I didn t see how we could take on
another industry with its different distribution, marketing, and manufacturing. I have to give
15
myself some [credit for] prescience on this. I was very concerned about the reaction of the
consumers to putting anything in milk. I saw that bullet coming. We ended up licensing it to
Monsanto, who just walked into a firestorm. They paid us a billion dollars, and got 10 billion
dollars worth of trouble. Thank God Genentech didn t try to do that on its own.
The joint ventures were an effort to focus, focus, focus, and spin out in ways where we could
benefit as much as possible but not lose our focus. Swanson and I were reading from the same
page on that.
Perkins s Friendship with Swanson
Perkins: Bob and I did have a handful of fairly major disagreements that surfaced from time to time. I
think it s fair to say that Bob and I, by the end, were not close friends. There had been too
many tough ones. Particularly involving Kirk Raab and the Roche situation. I took a lot of
bullets on those. I don t even know how much I want to get into it. I mean, the guy s gone.
We had a complicated relationship. I wasn t old enough to be his father, but certainly old
enough to be an older brother. There was some jealousy and rivalry. When he married and
wanted to build his house, large parts of it were copied from mine, which upset my wife.
Things like that. He was trying to find out who had more money, Bob Swanson or Tom
Perkins? [laughter] Interesting, though, that there was all that rivalry. That part of our
relationship was definitely unproductive. The early years were the better years. As the
business grew and it became necessary to bring in more people, particularly Kirk Raab, Bob felt
less and less essential to Genentech. In the beginning he was absolutely essential. Towards the
end it didn t matter whether he came to work or not. Although he agreed with every step along
the way, each step came with the loss of his prestige. Unfortunately, my name and fingerprints
were all over each step. You just add up enough of them, and I think there was a resentment
that was fairly serious.
Bugos: He knew Eugene Kleiner first. But when it came time to put together this deal, he came to you.
Perkins: You have to know more about my background. I am an entrepreneur. So is Kleiner, but not to
the extent I was then. While I was working at Hewlett-Packard, starting their computer
business for Dave Packard, I also invented the most commonly used kind of laser. I had the
idea, and persuaded Packard to let me do it as a moonlighting project on nights and weekends,
which amazingly enough, he let me do. It was a success, I made millions of dollars back when
that was a lot of money-the mid sixties. Back when the Earth was still cooling, [laughter]
Plus, I had built the largest part of Hewlett-Packard, the most successful and profitable part of
Hewlett-Packard. I put together Kleiner Perkins. I was a hotshot, I guess.
Swanson wanted to get on that bandwagon. That s why he came to work for us and why he
wanted me to be the player in Genentech. Which I was happy to do. Ten years. We had a long
honeymoon. We got along. We accomplished a huge amount. I feel a sadness that our
relationship didn t stay as good. It didn t totally sour. It just became a little more formal and a
little less friendly than it had been, although when Bob got sick I think I was a pretty good
friend to him. I talked to him at length. He had had the surgery and was debating whether he
16
should do chemotherapy. I urged him and urged him, and I think may have talked him into
doing the chemo which, unfortunately, didn t work. Towards the end, I think, our friendship
revived.
I have to say that I think the world of Bob Swanson. I don t know how I got on this negative
kick for the last few minutes. Looking back on life you wish your friendships could always be
as strong as they once were. The same thing happened with Jimmy Treybig. Ultimately, the
board decided that Treybig had to go after twenty years. That was a very difficult thing to do.
We re still friends, but it ll never be the same. That s what chairmen are supposed to do, I
guess.
Kirk Raab Versus Swanson
Bugos: We ll revisit this in a later interview, but in a nutshell, could you tell me the Kirk Raab story
and the Roche story?
Perkins: OK, Kirk Raab. Genentech was becoming a big, complex business. Bob s primary interest was
in what was going on in the research labs, and less so everything else. But he was having to run
everything else. He had hired very good people. Bob was very good at hiring good people,
keeping them and motivating them. He was certainly the best entrepreneur I ever worked with.
No question about that. I thought as chairman, that Bob was just doing a great job. But Bob
kept saying, "I m exhausted. I don t have a minute s time for my family. I can t take a
vacation. I ve got to get help." I kept saying, "You re doing fine, nothing s broken." Finally,
he just said, "We have to get someone in to help me."
It s very difficult to bring in a chief operating officer under a chief executive officer.
Anybody really great always wants to be the CEO. Bob and I both knew this, but we agreed to
try to do it. Kirk s name came up. Bob met with him first. Bob said, "I think we found the
guy." I was skeptical but willing to meet with Kirk and did meet with him independently of
Bob. I was impressed with Kirk. But I remember telling Bob that this guy is really good, he s
very aggressive, and I think it s going to be very hard for you to control him. In the long run, he
will want your job. Bob said, "If he didn t want my job he wouldn t be the right guy." So we
hired Kirk Raab.
He was there a long time. I can t remember how many times I had to go down and pull these
guys apart, get their hands off each other s throats, recalibrate everybody, and reacquaint them
with what the mission was, and remind them what everybody s job was. I think Kirk did a
better job of it that Bob. Bob had such mixed feelings about Kirk. On the one hand he
respected him and realized that he was brilliant, that he was building Genentech and that it was
going well. Bob was able to take some time off, enjoy life and enjoy his fortune. By then he
was an extraordinarily wealthy young man. He couldn t have done that and enjoyed his family
unless Kirk was there. On the other hand he was very insecure. Afraid that Kirk would
somehow displace him. Never really comfortable with Kirk. He did a great job of disguising
those fears. Most employees at Genentech, below the top levels, thought that Bob and Kirk
were a great team. People closer to them realized that there was a lot of tension there. Bob
didn t second guess Kirk too much, and Kirk would say over and over that there wouldn t be a
17
Genentech without Bob Swanson. He was the founding entrepreneur who created the culture.
For years they coexisted.
As part of the Roche deal, when it was important to make Kirk CEO, we had to find
something for Bob to do. So we made him chairman. I agreed, no problem. I stepped down.
Bob became chairman. I stayed on the board for a couple more years. And thought great,
everything is fine, I can leave. And I did. I left the board. Within thirty days Kirk was fired.
The only thing that all agree on-Kirk, Bob, and the rest of the board- was that if I had stayed on
the board it wouldn t have happened. I think if I had stayed on the board I could have kept it
glued together. After all, the alleged conflict of interest was, you know, two steps below trivial.
It was blown out of proportion. The lawyers got in there, frightened the directors, and it
happened. I think Bob didn t mind it happening. Maybe it should have happened, who knows.
Genentech has since gone onwards and upwards. I have a very high opinion of Kirk Raab.
Personally, I feel that the alleged conflict of interest didn t amount to anything. It certainly
should not have led to his resignation. I also think he was humiliated publicly, in an
excruciating way that might have ruined his future career. I think that was unconscionable. I
would never have agreed to the public humiliation that he was exposed to.
Bugos: Do you remember the sort of issues that Bob and Kirk clashed over?
Perkins: The issues were almost trivial. Either one of them could have taken either side of the issue. I
can t recall a single strategic issue, except for the Roche merger, where they really disagreed
from a basic point of view. It all had to do with who s running the company-an emotional
thing. It would just take me to go down and remind each of them where their interests were,
and that this is not an easy thing, and that they were mature guys, blah, blah. Over and over. I
spend a lot of time doing that with other companies. It s people who cause problems, rarely the
technology. That s what I do. [sighs]
I may go on the Hewlett-Packard and Compaq combined board. Now there s a CEO/COO
situation. I can see those two trains-and I m sure I ll be spending time on that. That s just life.
I think Kirk had and has a genuine respect for Bob Swanson. Bob created Genentech. He
created the culture, the enthusiasm, the research orientation, the way you treat scientists. Kirk
understood that. Kirk was very aggressive in the marketing side, in manufacturing, in the deals
and negotiations. I never felt that he was too aggressive, but aggressive. There d be
complaints, but I think those were normal.
Roche Acquisition
Perkins: Now the Roche story. Very complex. We had had some failures in research such that the
product pipeline was looking pretty dry. Genentech stock was under a lot of pressure, as were a
lot of biotech stocks. Kirk Raab and I and others on the board were worried. We were worried
about Genentech stock getting pushed down and some sort of hostile takeover occurring.
##
18
Perkins: Kirk mostly, with Bob, came up with the Roche arrangement that as you know is a complex
arrangement. Basically, it converted Genentech stock into a bond and stabilized the stock.
Then there were various performance criteria, where Roche could buy out Genentech. There
had always been the understanding that Roche had the right to buy out Genentech. There had
always been the understanding that if Roche did exercise its rights that it would spinout a
portion of Genentech so that it could remain a public company and so that it could keep its
stock option plans. This was a huge decision, and the board was quite definitely behind it-
including me, including Kirk and Bob. However, Bob was very difficult over this, and
negotiated salary and stock options for himself which were pretty aggressive. The deal couldn t
have been done without Bob s approval. So it was a price that had to be paid, and we paid it.
Again, with hindsight, I think it was absolutely the right thing to do. Genentech could have
been taken over by somebody else. Who knows what they would have done to it. Roche has
behaved extremely well. As you know, they did exercise their warrants, they did spin out part
of the company, and I think they re happy with their investment. The employees are happy as
well. So it was the right thing to do.
Bugos: Was independence the key to it? Was the overriding goal to keep Genentech independent? Or
was it the need to finance new manufacturing facilities?
Perkins: I think the overriding goal was to keep the research going and to develop the newer products
that were entering the pipeline, for scientific reasons, for economic reasons, for humanitarian
reasons. We felt that those were great products to have on hand. There was fear that somebody
could have taken over Genentech and simply milk what already existed and cut it way back.
We were confident that Roche wouldn t do that. It would be a foolish thing for Roche to do.
And they didn t. Those were the basic reasons-to prevent somebody from ripping off
Genentech by getting the patents, getting the royalty stream, getting the existing products, and
dispensing with its future. Genentech has been run for the benefit of the scientists and of the
consumers, pretty well over all those years. Shareholders have done all right too.
White Squire Fund
Bugos: About six months prior to the Roche acquisition you raised what the press called a "white
squire" fund. Was that one of many options you considered?
Perkins: Yes, but I never raised that fund, for a couple of reasons. First off, my wife had gotten very ill.
I just didn t want to take on the burden of that new fund. And it had to be quite a large fund to
work. It needed to be a billion dollars. I had raised five hundred million of it in two weeks,
from everyone who knew and loved me, and then I hit a brick wall. I realized it would take a
year to raise the other five hundred million, a year of just full-time, day-after-day fundraising. I
can t do that and be with my wife, so I didn t do it.
Who knows how it would have worked out. There were times when that fund would have
been absolutely brilliant, and there were times when I would have lost my shirt, depending on
whether I would have been smart enough to foresee all those rums in the road. I presently think
I m pretty lucky that I decided not to do that.
19
Bugos: What were some of the options you explored prior to the Roche acquisition?
Perkins: I don t think that there were any others. We talked about taking it private, but even at depressed
stock prices there was so much money involved that I didn t see how we could do that. That
would have been the third option to protect it. Again, in hindsight, the depression in the stock
market for high-tech issues didn t last that long, so some of the pressure disappeared. Maybe
we didn t have to do the Roche deal. But I remember that for a year and a half after the Roche
deal, we were all congratulating ourselves that we did do it. I think it was the right thing.
Roche has behaved extremely well.
Bugos: One more specific question. Because of the success of the clinical R&D partnerships, a lot of
Genentech stock was issued in the late 1980s. Some people suggest that this dilution in stock
may have driven down the prices and driven you to the Roche deal.
Perkins: Well, some of that kind of criticism is ridiculous. At the time, you have to do what you have to
do and hope it works out all right. Hindsight is a wonderful thing.
More on the Genentech IPO
[Interview 2: October 31, 2001] ##
Bugos: Let s start by revisiting the IPO. In our last conversation you focused on the importance of
getting to market first. Today, perhaps we could focus on the specifics of how you got to
market, preparing the company for the IPO, and what happened afterwards.
Perkins: Financially, we had gotten the company to a modestly profitable or at least breakeven point.
Prior to the Internet boom, companies had to have some financial performance in order to have
effective public issues. We thought, and I think we were correct in this, that Genentech had to
look fairly good financially. Lubrizol functioned as a mezzanine investment, establishing a
solid value. We had that in mind in taking those funds, that it would set up the IPO.
With the IPO, Swanson was a reluctant bride. In some ways it was better for me to be
pushing for it than for him to be pushing for it, in terms of relationships within the company.
To the extent that he was forced to do it made it easier for him to sell it. I think he understood
those roles, though in the beginning he really was a bit reluctant. Once the momentum began to
build he was very enthusiastic about it. Once the roadshow started he was especially
enthusiastic.
Possible Sale to Eli Lilly. Inc.
Bugos: One other option would be to sell the company to big pharma. One significant theme in the
history of biotechnology is that it is an independent industry rather than a scientific service
20
within big pharma. That s based largely, I believe, on the decision that you personally made to
go public rather than to sell to a big pharmaceutical firm.
Perkins: We did have some preliminary discussions with Lilly. They made one of the biggest mistakes
in business history in that they didn t try to push us very hard to sell the company. I think if
Lilly, a year before the public issue, had made an attractive offer we probably would have gone
for it. Because there were no precedents to follow; we would have had a good return on the
investment. That would be that. But they didn t. So we gave up that idea and decided to
pursue the public issue.
Bugos: I heard that an 80 million dollar figure was mentioned and that Lilly never responded to that.
Perkins: I remember it being a hundred million. About a year before the public issue we had a dinner at
my house in Belvedere with senior Lilly people and Swanson and Boyer, where we kicked the
idea around. It wasn t a hard sell. It was sort of an exploratory discussion. They didn t jump at
it, and we felt we could do this without them. So we let it drop. It wasn t an urgently,
strategically pursued idea. It was just an exploration. But if they had picked up the ball it
might have happened. Of course, with hindsight they should have. And we shouldn t have ever
talked to them, [laughter]
Picking Investment Bankers
Perkins: In your list of questions you ask why did we pick Bud Coyle at Blyth Eastman Paine Webber
and Bill Hambrecht? Kleiner knew Bud Coyle very well. Coyle had been romancing Kleiner &
Perkins and was extremely enthusiastic about doing Genentech. Then I picked Hambrecht &
Quist because I had good experience with them. Historically, we always looked for an East
Coast and a West Coast investment banker. It seemed like a good match. Why not Tommy
Unterberg? I guess I wasn t that impressed with him at the time. I guess he did Cetus after we
went public. I ve had a long and not entirely satisfactory relationship with Tommy Unterberg.
I probably was a little soured on him at that time. In my opinion, Tommy Unterberg is deeply
and profoundly cynical and considers most investors to be stupid. And it s just hard to deal
with somebody like that, whereas Hambrecht & Quist are Boy Scouts. They dig in there and do
a good job. They were also co-investors on the second round, but very small. Token.
You also asked about why we took in Inco and Mayfield. It s just that we needed the money.
We were spreading the idea around with people that we thought would be supportive in talcing
this thing all the way.
Recruiting the Genentech Board of Directors
Perkins: Similarly, getting Dave Packard on the board. I took the lead on that, though Swanson was
enthusiastic about it. That was kind of a gamble. After he agreed to go on the board of
directors and we had our first board meeting, I realized that I, in effect, was risking my
The Genentech Board of Directors, from left to right: David S. Tappan, Jr., Thomas J. Perkins, Donald L. Murfin,
Robert A. Swanson, Dr. John T. Potts, Jr., David Packard, Dr. Herbert W. Boyer, and Harry Faulkner
photograph from the 1982 Genentech Annual Report
21
chairmanship by having an individual that famous and powerful on the board. But Packard,
fortunately for me, let me be chairman. He was a very strong and wonderful director, but he
never dominated a situation or insisted that his ideas prevail. I don t think we ever had a strong
disagreement on anything, but the whole financing of Genentech was so alien to what he had
done at Hewlett-Packard. He was more bemused by it. Kind of entertained by it. More so than
the other directors.
He was on the board of Boeing, maybe U.S. Steel, some big companies. Hewlett was on the
Chrysler board. I approached him by saying, "This is so completely different from anything
that any of us have ever done before. It s really exciting. It s like Hewlett-Packard all over
again but in a different industry. Great science, great opportunity. We need all the help we can
get. You ve been through it. Would you give us a hand?" Remember that he was a friend of
mine, also. Kind of to my amazement, he said sure. A couple of years later I heard from
somebody else at Hewlett-Packard, maybe John Young, that they were all standing around the
famous coffee pot in the top management area. Packard came out and somebody asked, "Dave,
since you ve been on the board of Genentech have you learned a lot about DNA?" And
Packard replied, "I haven t learned a damn thing about DNA. But I ve learned an awful lot
about financing!" [laughter] Which is kind of a backward compliment.
Some other directors-Professor Potts, who Bob found and placed on the board. John Potts
was terrific. Became a good friend. Also Harry Faulkner from Alfa Laval was strong. Don
Murfin was strong, and Dave Tappan. We had a pretty good board.
Bugos: Was your willingness to take investments from companies like Lubrizol and Fluor driven by
your desire to get a broad base of industrialists like Murfin and Tappan on your board?
Perkins: That s right. We could have raised money from just about anybody. We were fairly selective.
We didn t have other venture capitalists on the board. I didn t think that was necessary. A
typical board would be mostly venture capitalists, so our board looked pretty sophisticated
compared with most boards. We had a good board, and that didn t hurt the public issue at all.
Perkins as Chairman
Bugos: And most of the companies represented on your board explored the options of doing joint
ventures with Genentech, like HP Genenchem in research instrumentation.
Perkins: Right, which we did do. That was not brought on by Dave Packard though. It came out of the
laboratory side of Genentech. Likewise the benchmarks on the licenses, which you asked
about. I personally was not very involved in determining those benchmarks. That was pretty
much Swanson and the research people that came up with those goals, which I was educated to
and went along with. But I don t recall ever changing those or trying to influence that very
much.
Basically, Swanson and the research people were a coalition, and Fred Middleton and I and
the management people were a coalition. I got much more involved in the financing,
marketing, production side of things. Though Bob did get involved with all the things I got
22
involved with, he kind of let me carry the spear in those directions. We worked pretty well
together. I never ventured into the research side very far. I did attend all the research meetings
where there were reviews of all the projects and tried to keep abreast of the science as best as I
could.
I spent a lot of time at Genentech. One afternoon a week, year in and year out. Swanson and
I would get together over lunch, and that would spill over into some Genentech activities.
Bugos: The benchmarks allowed Genentech to avoid going back to the venture capital well.
Perkins: Absolutely. It worked extremely well. It was one of those win-win situations where the
licensees were happy and we were happy. Plus it set the company up to be profitable. It
established a business savvy which none of our competitors ever equaled. Except Amgen, later.
License Agreement with Lilly
Bugos: Attaching those benchmarked licenses to the S-l registration document, as the SEC requested,
was something Genentech strongly resisted.
Perkins: Yes. We actually were successful in excising the confidential aspects of those contracts. Bruce
Mann was. We figured that our competitors would try to ferret out the details of those
contracts. They were literally inked out in the SEC files. That was, I think, a first.
Bugos: What about the argument that they may have shown a very young Genentech negotiating from a
sign of weakness, a weakness you didn t want other potential licensees to know about. Did the
Lilly contract display Genentech weakness?
Perkins: No. No. I didn t view that agreement as a sign of weakness. Just the reverse. The royalty
payments were unusually high. We just didn t want to disclose all the details of that. That was
a great deal.
The relationship with Lilly ultimately soured, and there was litigation. Lilly basically tried
to break the patent. There was a long history of bad blood with Lilly. But that developed later.
In the early years, the contract paid large royalties into Genentech. I also had some trouble with
Lilly in connection with other companieswith nothing to do with Genentech. I came to the
conclusion that they were fundamentally unscrupulous people. But that, was later.
Bugos: Was it Dick Wood you worked with?
Perkins: Yes. Arrow Collar Dick Wood. That s what we used to call him.
Bugos: Do you think he understood what Genentech was trying to do?
Perkins: I don t think he had a clue. Lilly had made some drugs that saved some lives. I thought that
they had a very self-righteous attitude, like a liberal Democrat: No matter what you do, since
your heart is in the right place, then the ends justify the means. So they could do some bad,
23
ruthless, anti-competitive things and consider themselves still as saviors of human kind, in my
opinion. It was kind of weird. They could cheat and steal and still consider themselves to be
good corporate citizens, I thought.
We went to them because of their monopoly power. As good monopolists, I felt, they
realized that we were a major threat to them. If we had licensed it to one of their competitors,
that competitor could have given them huge problems. So you d probably get a good deal from
a monopolist, I thought. That s what we got.
The early years of our relationship were fine. They paid us on time. I forget when we got
into the patent problems with them, but it was at least five years into the mission. I think they
realized the scale of the royalties they were going to be paying us. Some lawyer decided to
figure a way out of that.
Negotiating Other Licenses
Perkins: Kabi by contrast, approached us, and that was a more friendly negotiation. That was a
Swanson-negotiated contract. I got involved in the Lilly negotiation, went back to Indianapolis
and was working with Tom Kiley on that contract. But not with Kabi. I never went to Sweden.
Swanson pulled that one out of the hat. That remained a good contract for a long time. Same
pattern with Roche on interferon, the other licensing agreement prior to the IPO. Swanson and
Kiley went over to Basel. I didn t go with them.
Bugos: And the idea that Genentech sells the drug three times-regionally, in Europe, Japan and the
United States-rather than one global license to a big pharmaceutical. Where did that come
from?
Perkins: I have to give Swanson full credit for that. He, for whatever reason, had a great interest in and
affinity for the Japanese. He got along extremely well with them and was always interested in
cultivating a Japanese connection for Genentech. He enjoyed going to Japan and negotiating
with the Japanese, which very few people do. [laughs] And he did a great job on that.
Bob had an early appreciation for the science at Genentech. More than anybody did. This
enthusiasm came to him early-that you could divide up the world and get a lot of people
interested in paying a lot of money for this. Swanson, for a young guy, had an incredible
vision. I d never seen anything like it before.
Fully Integrated Pharmaceutical Company (F1PCO)
Bugos: Let me have you look at the December 1978 business plan, where Genentech outlined a vision,
a somewhat different one than you started with. I m not sure that this document would have
come to your purview of chairman. Basically it says that Genentech was going to become fully
24
integrated, get into the manufacture and marketing of its own drugs, and become the first new
pharmaceutical firm to be born from this new technology.
Perkins: Of course, to become fully integrated was the rule, not the exception, for everything else that
we were doing. Kleiner Perkins has never advanced anything that was just meant to be a
licensing vehicle. My instinct, and Swanson s, was to make this thing fully integrated. After
all, we were MBAs and that s what we were trained to do. Marketing, manufacturing, the full
monty. [laughter]
What was so different about Genentech was the astonishing amount of capital required to do
all this. I know, on Day One, if anyone had whispered into my ear that, "For the next twenty
years you will be involved in raising literally billions of dollars for this thing," I might not have
done it. [laughter]
But in 1979, it occurred to me that for something of this importance, that there was enough
money out there for us to do whatever we needed to do. I always viewed my rolemy ultimate
responsibility was to make sure that the company didn t run out of money. That was my job.
Swanson s job was to make sure that the company deserved more money, at ever increasing
prices. We both had a pretty clear notion of that. It worked for a long time. Hence, all the
different things that we did-the private rounds, the research partnerships, the public rounds,
and all the deals. It was always more capital than I anticipated. It dawned on Swanson before it
dawned on me.
I can t remember at what point it dawned on me that Genentech would probably be the most
important deal of my life, in many terms. The returns, the social benefits, the excitement, the
technical prowess, and the fun. By 79 I was a total Genentech junkie. I was committed to
making Genentech into a huge success. I had signed on for the long haul pretty early. The idea
of making a fully integrated company was very attractive and very consistent with everything
we were doing.
Bugos: How did you go through the process of envisioning what Genentech, as a fully integrated
company, would look like?
Perkins: Bob studied both Syntex and Alza. He met [Alejandro] Zaffaroni. Bob was very charming. He
would meet with someone like Zaffaroni, who was very successful and important, and say,
"You ve done it right. I m just this little guy with an idea, and I d like to learn from you." A
sincere form of flattery. They would tell him everything. Bob did understand that model.
Syntex did all its manufacturing in Mexico. We talked about that.
Should Genentech be an off-shore company? There were reasons to consider that. All the
uproar over genetic engineering in the press and in the public. We decided that we would do it
here. But the decision to locate in South San Francisco-that location was picked for
manufacturing because it was not Berkeley. We perceived that Cetus would have a lot of
trouble in Berkeley, and they did. Just from Berkeley being Berkeley. Whereas, Bob and I had
a meeting with the then-mayor of South San Francisco, who was very encouraging of us to
locate there. Bob was very thorough. He explored the political side, he explored the corporate
models, then laid out a strategy.
25
We rented space in those old warehouses then spent fortunes outfitting them and buying
them and building. Of course, that s where a lot of the money went, in outfitting those research
facilities.
m
Perkins: Most companies aren t constantly raising money the way that Genentech is. After a while it
dawned on me that there will never be enough money for Genentech. Especially with the nature
of the clinical trials.
Risk Factors for S-l Registration
Bugos: Which brings up another question about the IPO, the issue of writing risk factors for the S-l
registration. This is a brand new industry, and a company for which there were no good
models, nothing to forewarn you, for example, about the amount of capital required.
Perkins: I think I wrote the risk factors on that S-l, originally. Of course, the lawyers then went through
it. I ve been involved in a lot of risky IPOs, and early on I learned there s a way to write the
risk factors so that by discussing the negative you can emphasize the positive. Something along
the lines of, "There is no guarantee that this company will soon become the most important
biotechnology company on the face of the planet." [laughter] Is that bad or good? We said
there s no guarantee. And, "There s no guarantee that our fundamental patents will survive
every challenge." I used to have fun writing those risk factors, so I probably wrote
Genentech s.
Bugos: And you anticipated that perpetually raising capital was going to be a risk factor?
Perkins: No. Certainly there was no risk in raising the IPO. By the time I was promoting the public
issue I was convinced that it would be successful. It was more successful than I thought it
would be. I would never have promoted the idea if I thought there was any risk in carrying it
off. When you walk out onto the stage and sit at the piano, you d better be able to play the
piece. I would never have exposed the company to a failed IPO. Hence the mezzanine round,
which sets up the IPO. Which is something Kleiner Perkins has done many, many times. We
did the same thing at Tandem, before its IPO.
Hostile Press
Perkins: But this IPO was extraordinary. There was so much press. Even the hostile press helped
establish the name, helped make the company famous.
Bugos: Hostile press meaning the concern about biohazards, academic freedom, the private ownership
of public knowledge?
26
Perkins: There were two streams of hostile press. One was the Jeremy Rifkin, Luddite, anti-technology
stream, which is still going. At the root of it was a genuine fear that we d make Frankenstein
monsters, poison the atmosphere, and everything else. The other stream of it was whether it
was morally correct for these academicians to make so much money, like Boyer. That died
down as the Genentech competitors got going and hired all these people. It was easy to be
jealous and hostile until you were at the same gravy trough yourself. Then you have to shut up.
And of course, early on, Boyer gave so much back. Boyer would have the Nobel Prize if he
hadn t made so much money.
Bugos: So the concerns about biohazards and intellectual property had been largely quelled by the
1980s?
Perkins: Yes, by the early 1980s. The fact that there isn t any risk has something to do with it.
[laughter] Eventually people would wake up to that fact that it really wasn t risky. In the early
days, we didn t know whether it was risky or not. So some of the bacteria we used were
selected to be weak, so that they couldn t survive outside of their special environments. Should
we have a leak, no one would be hurt.
Also, for example, we never had a live HIV virus at Genentech, through a conscious decision
not to take that level of risk even though we were working on HTV. We worked very hard on
HTV, for many years, with essentially no success. We tried three or four scientifically very
exciting approaches that didn t pan out. It was one of the big disappointments at Genentech.
Food and Drue Administration Approval
Bugos: What about government risk, regulatory risk, like dealing with the Food and Drug
Administration? The risk that the FDA wouldn t understand what you were trying to do, that
they would only understand if big pharma presented them with the data. Was the FDA a
particular area of uncertainty?
Perkins: Yes, but we were so sensitive to the potential for delays within the FDA, that Genentech
worked that side of the equation aggressively. At the end of the day our drugs were approved
on a much faster track than most. That was another thing Swanson did a good job with the
handling of the political side of the FDA. He and the research people did a really brilliant j ob.
They learned quickly, and learned very well, how to design the clinical trials with the FDA very
fully informed as to what was going to go on. What would be the efficacy benchmarks, and so
forth. There have been some holdups at the FDA, but it would be interesting to contrast
Genentech s time at the FDA with everybody else. I think you would find that it was much
faster, It was well done.
Bugos: So there was no prejudice against Genentech being a startup, being a biotech company?
Perkins: I think there was prejudice/or. Genentech had a lot of appeal. First of all, it was
fundamentally new science, so we could get the attention of the best scientists at the FDA. We
weren t making some aspirin substitute, you know, which would gravitate down to the bottom
27
of the FDA. This was really hot, life-saving technology. So the really best people at the FDA
worked on it, and the reason they re the best people is because they re smart. They liked
Genentech. They bent over backwards to help Genentech, because Genentech did not have the
arrogance of the big pharmaceutical companies whose researchers probably considered
themselves superior to those at the FDA.
But did we love the FDA? Of course not. To this day, I think the FDA is pretty much a
redundant organization. The whole idea of efficacy is a dangerous idea and should be
eliminated. But that s my political view.
There were some mistakes that the FDA made, that Genentech could have publicized to
embarrass the FDA for short term tactical advantages. Now I m talking about Kirk Raab more
than Swanson. Raab perceived that that s not the way you play the game. You just cooperate,
and love em, and eventually it will work out.
But there was conflict. For example, tPA, the blood-clot-dissolving drug, could be
extremely efficacious in the treatment of strokes. Not those caused by hemorrhage, but those
caused by blockage. There were a number of papers written by researchers, not at Genentech
but out in the world. It s illegal for the Genentech marketing staff to circulate those papers to
anybody. Genentech salesmen cannot even call a paper to the attention of a potential purchaser
of the drug. That s true for all off-license pharmaceuticals in the United States. I have always
thought that s an absolute violation of the First Amendment right. It s so egregious. I tried to
talk Swanson and Raab into taking that one to the Supreme Court. It s outrageous that you
can t hand a physician an article from the New England Journal of Medicine without potentially
going to jail. I think we could have won that one. But I could never get any momentum going
on that because it would have been so offensive to the FDA. We would have gone onto their
enemies list. Someday, I d like to see somebody take the FDA to court on that, [laughter]
Bugos: Do you think it helped your relations with the FDA that your first two products, insulin and
human growth hormone, were natural products. There was no question about efficacy, just
about Good Manufacturing Practices?
Perkins: Yes. We had some holdups in getting approval for our plant. There were some paperwork
snafus and some batch tracking problems. Everybody has these; we had some. But I think the
FDA was charmed by Genentech. They tried to help Genentech, and did.
Growth Hormone Sales Controversy
Bugos: The problems you mentioned with off-label discussions of tPA, would that have been about the
same time that Genentech was questioned about off-label sales of its human growth hormones?
Perkins: Maybe. Kirk Raab was extremely aggressive. In my opinion he never did anything that
approached the unethical. Was it atypical? Absolutely. Was it aggressive? You bet. But so
what? That s my attitude. And to the extent that I influenced the board, that was probably the
board s attitude.
28
Bugos: Do you recall the growth hormone controversy? Another Kleiner Perkins company was
involved with that-Home Health Care. Could you give me some insight into that story.
Perkins: I think Home Health Care, unbeknownst to Genentech, carried it further that they should have.
One or two physicians did. "Kickback" was the term used in the press. There was a physician
who was paid to do research, and maybe it wasn t research and maybe it wasn t done. I didn t
know about it, the board didn t know about it, Swanson likely didn t know about it, and
probably Raab didn t know about it. Did somebody at a lower level in Genentech know about
it? Maybe. Should it have been brought up? Yes. Was anybody hurt? No. Did it damage
anybody? No. But we shouldn t have let it happen.
Bugos: Because you were involved with those two companies when the decision was made to make
growth hormone an infusible drug, did you suggest to anyone at Genentech that they contact
Home Health Care to deliver the drug?
Perkins: No. Actually, Home Health Care, because of its size, was a logical choice. It came about
without any effort on my part. Kleiner Perkins was, as I recall, no longer on the board of Home
Health Care. By the time that happened we had detached.
Bugos OK. You mentioned the Supreme Court earlier. Another press item leading up to the IPO was
Diamond v. Chakrabarty, wherein the Court allowed a utility patent on a living organism. It
unleashed the floodgates on a number of patents in the life sciences, including the Boyer-Cohen
patent. Do you remember how significant that was in generating press as you approached the
IPO?
i
Perkins: It was important, but we still would have gone ahead. If Chakrabarty had not been approved
there would still be a Genentech and it would have looked pretty much the same. It was
obviously good news.
Quiet Period Violation
Bugos: So the last issue leading up to the IPO was the alleged quiet period violation.
Perkins: That was interesting. There was so much interest from the press that it was impossible to have
a conventional quiet period. The press just kept writing about Genentech. Even though the
company was sensitive to the fact that they shouldn t talk to the press, it looked like the
company was talking. It looked like the company was ginning up interest. The SEC was
concerned about that. The reason I picked Bruce Mann was because I knew that Bruce himself
was being considered to become a commissioner of the SEC. Bruce was very highly regarded
at the SEC. He had great rapport with them. He said to them: "We can t keep this quiet. It s
just explosive. You ve got to let this IPO go or it s just going to get worse." And they did. As
I recall that whole incident was just a matter of weeks. It wasn t a major holdup.
29
IPO Roadshow
Bugos: Did you, as someone who had been through some IPOs, coach the Genentech people on how to
approach the IPO?
Perkins: Yes. I did. But this one was different from everything. I explained what the roadshow was,
how the investment bankers built the book, how we had to have it oversubscribed by ten-to-one.
Just the ground rules, because I had been through it a couple of times. Swanson was a natural.
That roadshow was great. We just knocked their socks off. I don t know how many times it
was oversubscribed, a hundred, maybe a thousand. It was just a crazy deal.
Bugos: So no hard questions?
Perkins: Well, yes. The questions were: You guys make hardly any money, hardly any sales, how can
you possibly justify this kind of valuation? Then the guy asking the question, after the meeting,
would try to fight his way in and get more shares than he was entitled to. In hindsight we
should have sold more shares at a higher price. On the other hand, we gained worldwide
publicity, and it was worth it.
Genentech Jolts Wall Street: San Francisco Examiner, 1980
Bugos: Do you recall the conversations on the price?
Perkins: I remember a telephone conversation the night before with Bill Hambrecht. We had set the
price. Swanson was on the call too. Hambrecht called up and said, "This thing is wild. I ve
never seen anything like it. If you want to, we could change the price, but we d have to refile
and that would delay it a day or so." We decided, no. Let s go with what we got. I remember
getting up early in the morning to see what the trades would be. We wanted it to trade up about
10, 15 percent. We didn t expect it, or want it, to double or triple. I remember calling
Swanson, who was pretty cool about all this, and waking him up, and saying, "You re the
richest guy I know Bob." "What, what?" he said in a sleepy voice. Just blew him away.
Bugos: And that was the first time there had been such an enormous run-up on a first trading day?
Tandem wasn t like that?
Perkins: No. Tandem was more conventional. All of them were. I have always tried to price the thing
so that you leave about ten percent on the table. Then everybody s happy. The syndicate can
dissolve immediately. If you push it right to the gag level, if anything goes wrong, then you
have an embarrassment. The syndicate can t dissolve, and the investment bankers hate you.
The next time you try to raise money from the public everyone will remember. It just makes
sense to leave something on the table. But all investment bankers don t view it that way. Some
do push it.
Let s say you agree that the price will be ten dollars a share. That s the price on the
prospectus, that s your latest filing with the SEC. You think, though, that it s going to trade at
30
twelve. There s some more demand for the shares than what you are selling at. You purposely
price it so that there will be immediate profit in it for the syndicate. Then several things
happen. They re called underwriters because the long list of investment bankers involved in
taking one of these things publicthey all agreed to purchase a certain number of shares from
the company. But they don t ever want to touch those shares. They want to have sold them
ahead of time. If the price is ten, and the first trade is at eight, then they re stuck. They have to
purchase those shares at ten, and sell them much later or at a loss. So the underwriting
syndicate can t dissolve until they ve purchased or sold the shares. But if the shares initial
trades are over that purchase price, then they don t need to buy them. The syndicate is
dissolved instantly. They never have to risk their own capital. They love you. The next time
you come along, they have a pretty good idea that you ll do the same thing. Kleiner Perkins has
always done that. So a Kleiner Perkins deal always has a certain attraction to them. Everyone s
going to make some money on this. Kleiner Perkins protects us. Kleiner Perkins could have
taken twelve, instead we only took ten.
The other reason to do that is that there s a long list of secondary shares that eventually want
to be sold, and the investment bankers want you to hold those back for a certain number of
days. Again, if you have underpriced it slightly it makes it easier for those shares to come out
later.
We call it getting the hockey puck on the ice. Taking a company public is just a first step in
a long series of financings and secondary issues. So we tell our entrepreneurs to sell 8 to 15
percent of the company. You can sell more later, at higher prices. That s also behind leaving
something on the table.
But of course, at Genentech, we left much more on the table than we should have. Unless
you look at it as a public relations move. Genentech came to most people s attention through its
IPO and the financial side of the story rather than the medical and scientific side. To this day,
most people can recall the Genentech IPO, as wow, but probably not the drugs. So it worked.
Bugos: After that huge run-up it settled back to the IPO price. Investors still got their 10 percent, but
what impact did that settling have?
Perkins: None. Everybody, including the option holders, understood that that first day of trading was a
bizarre bubble. It overvalued the company. It was a great company, but it wasn t that great.
We had to earn back that price through performance which, ultimately, we did. It took years.
Everybody understood that.
##
Perkins: Even those shareholders were happy. I met little old ladies, who had money but who had never
speculated on stocks, that bought Genentech paying top prices, paying eighty-seven dollars a
share. I remember some lady in Santa Barbara telling me she had paid eighty-seven dollars a
share, and it had gone back down to thirty something. She was happy. She said, "I got those
shares and I m just going to put them away, and maybe my grandchildren will make a lot of
money on them." Those people kept those shares. They were in love with Genentech, and they
were right to be. [laughter]
31
Bugos: Was it the individual investors who ran it up?
Perkins: It was individual investors that ran it up, and that was something we hadn t anticipated. We
thought it would be purchased by the institutions, who did purchase the IPO shares. But it was
the public who ran it up. There were just buy orders from all over the world.
I had a secretary at the time who knew all about Genentech and asked if she could get some
shares. Those shares were so rationed, but I did get her some shares through Hambrecht &
Quist. I sold her shares at maybe fifty, on the way up, because I thought even that was crazy. I
sold them even before I got into the office that morning, and by the time I did it was trading at
eighty. I apologized to her, "I got you out at fifty. I m sorry." [laughter] But she was very
happy. It was a crazy time. Headline in the San Francisco Examiner, "Genentech Jolts Wall
Street!"
That s why we re talking. It s part of the Genentech culture. It established Genentech as the
Godzilla of this industry. With hindsight, it was the right thing to do. I couldn t have planned
it any better, even though I didn t plan it at all. [laughter]
Fundraising in the Doldrums
Bugos: Tell me a bit more about fundraising during the period that the stock had settled back around its
IPO price. It was some years before you went back to the public. In the meantime you did
some private placements with the Japanese, with Fluor, you did the clinical partnerships. Did
the goodwill you got that first day evaporate?
Perkins: No. Any savvy investor realized that that first day was a bizarre event, but that Genentech was
still a strong company. It made it even easier to do all these other rounds and the partnerships.
Sometimes souffles can rise twice, and there was a strong expectation that Genentech stock
would recover and do well. Which it did. The problem for Genentech came years later with the
erosion that led us to the arrangement with Roche.
Japanese Placement
Bugos: So the Japanese placement you did; a small placement, that was actually a small down-
financing on the IPO price.
Perkins: Yes, but not by much. Swanson gets 100 percent of credit for this. He perceived that having
Japanese investors in Genentech would make it easier to deal with everything Japanese-
licenses, sales in Japan, and so forth. He had met Yaichi Ayukawa [of Techno-Venture Co.
Ltd.], who was a terrific guy. I met him through Swanson, and subsequently did some other
Kleiner Perkins deals with him. He was a Ph.D. from MIT. His father was a founder of the
Nissan zaibatsu. Bob correctly figured out that Yaichi could open all the doors in Japan that
needed to be opened. At the time we went to Japan to sell those shares it was illegal for a
32
Japanese investor to invest in an American placement-not a publicly traded stock, but a
placement. Yaichi knew the minister of finance. I went with him on the visit. There was some
fine print in the law that said if such an investment would be good for the Japanese nation then
it could be permitted. The minister said sure, this would good for the Japanese nation and we
got the permission. That was a first also. That hadn t been done before with Japanese
investors. We had been using Nomura Securities to help us, and they had come to the
conclusion that it could not be done. We went back with our little letter and they were
astonished.
The capital then came from a nice long list of investors. They were important financial
institutions that we could talk about when talking with other Japanese companies and
manufacturers. Bob was brilliant at playing the Japanese card. He liked and respected the
Japanese. Rather than cunning. He enjoyed those negotiations and those trips. Similarly with
the Europeans. Bob was very good at that. He had an ability to make those people feel very
important. Like they were getting in on the foundation. Bob was a superb salesman. I m a
good one too, and when we both got on the same wavelength we were awesome.
Downward Pressure from Secondary Shares
Bugos: What was the story with the placement from Fluor? I d heard that some of the shares Fluor
bought were founder shares coming onto the market after the lockup. Was the release of the
founders shares a big concern?
Perkins: No. Over the years that s always been a concern of the management of the companies we ve
invested in. We ve always taken the position that when we distribute our shares to our
investors, the company won t even know it s happened. They won t detect it in the stock price,
we ll be so careful. Some will hold it, some will sell it. That gets back to the issue of whether
you should take a weak company public. If you can just barely sell the stock to the public, so
that you re worried about any downturns or secondary offerings, then it s just not suitable to
take public. I don t recall ever being concerned about downward pressure on the stock price
through secondary shares at Genentech. I can t imagine it ever would have moved the stock
more than a dollar or two.
Bugos: But by 1982, 1983, the bloom was off the rose for biotech stocks. Cetus, Biogen, Genex all
went public after you and the general market for biotech stocks was depressed.
Perkins: Yes it had. But I don t recall any of those Genentech placements specifically addressing the
issue of downward pressures on secondary shares.
33
Selling the Clinical R&D Partnerships
Bugos: What about with the clinical partnerships. Those were sold retail, to high-net-worth individuals
about the time that the biotech bubble had appeared to burst. Do you recall those being hard to
sell?
Perkins: No, and that would still be a good way to finance trials if the IRS hadn t taken the steam out of
the boiler. You can t get the tax benefits any more. It was a great idea. We also used it at
some other companies, but it was the Internal Revenue Service who got unhappy with it. It got
shut down with a lot of other things. In 1986 the tax laws got changed pretty fundamentally,
and oil wells and cattle feeding and all that other stuff got shut down.
Bugos: You actually became chairman of the Morgan Stanley Ventures, which did these R&D
partnerships?
Perkins: Yes. But that was not a great deal for me or Fred Middleton or Morgan Stanley. Morgan
Stanley never marketed it the way it should have been. Fred Middleton was probably too
conservative in picking companies, and the vehicle got shut down by the IRS. Also, about then,
I began to hate Morgan Stanley for entirely other reasons and I didn t want to have much to do
with it anymore.
I ve run out of investment bankers, [laughter] I ve been in the business too long. Except
for Fred Frank, I think they all have the mentality of lobotomized sharks. There has to be
somebody new starting up that I can work with. I just hate them all. [laughter] I should write a
book, but I would be sued. I was married to Danielle Steel when she was finishing her book on
her son, who had committed suicide. And the lawyers just made her take so much stuff out.
The horror stories I could tell you about this business!
Bugos: Please do. While the tape recorder is running, [laughter] OK, back to the R&D partnerships.
The standard unit sold was fifty thousand dollars. A few people bought a couple units. You
though, I see from the subscriber lists, bought a million dollars worth. What was that about?
Perkins: I thought it was a great investment. And it was. I made millions on that. I don t step in front of
trains. I believed that was a great deal. To be in this business, from a psychological point of
view, if you re always balancing the risks and rewards then you ll never do anything great.
What I do is, I start off cynical and skeptical and very suspicious of the entrepreneur. The first
hour with me is pretty tough, I guess. But if you get through that first hour then I just get so
enthusiastic. It s almost like I then develop a mental block on what the downside could be. So
when I write that check I m very enthusiastic. I think it was that way with the R&D
partnerships too. As I recall I took one of the bigger pieces. And if it helped sell those, then all
the better.
Bugos: Did you do any retail sales on those? Take meetings with potential investors to get them to
buy?
Perkins: I can t recall doing any meetings. I did talk to them on the phone. We did a similar thing at
Hybritech, and that was very hard to sell. We had three investment bankers involved. Two out
of the three failed totally. The third one did it all. But that was a different story. I remember
Bugos:
34
Steven Evans-Freke at Blyth Eastman, and he was very enthusiastic about it, for Genentech. It
wasn t oversubscribed, but we sold them all in about sixty days.
Do you remember needing to add the conversion to shares to make them easier to sell? I think
the initial partnership plan called for investors to get only part of the royalty stream.
Perkins: Are you sure that conversion into common shares wasn t in there on day one? I can t imagine
that I would have bought a million dollars worth if it didn t have that conversion feature. I
believe that was part of my original idea. There was a lot of re-enlistment in those three
partnerships. A lot of the same investors. It was a win-win.
Chairing a Public Company
Bugos: What about any difficulties in being the chairman of a public company? Did you have to spend
more of your time telling the Genentech story to analysts or others in the public markets?
Perkins: I didn t deal with the analysts. That was Fred and Bob. If you re going to be the "elder
statesman," you can t really talk to the analysts. Maybe once a year you opine on something.
But if you re blabbing all the time, it s hard to be the elder statesman, [laughter] There has to
be a little mystery.
Bugos: As a public company did you feel even more pressure to keep expenses below your contract
revenue? To remain a nominally profitable company?
Perkins: Yes. With companies that are shipping widgets, you count how many you shipped and that s
how much revenue you made in a quarter. Genentech was much easier to anticipate revenues
and earnings-by the nature of our research contracts. We had some flexibility in when we
would achieve those benchmarks. I m not saying that we managed our earnings. But we were
able to show a developing stream of earnings out into the future.
Independent Biotechnology
Perkins: The great disappointment with Genentech was the slowdown in the late 1980s--that we had to
do the Roche deal. With hindsight, I think we had to do it and that it was the right thing to do.
Roche has behaved wonderfully, but it was a pity. The stock market was being very tough, and
we were concerned about a hostile takeover.
I remember the meeting we had with the shareholders where we presented all of this. One
lady stood up and said, "I have a question only for David Packard. How could you permit this
to happen Mr. Packard? It s like leaving New York on a train to San Francisco, and you re
making us get off in Denver. How could you permit this?" His answer was, basically, "I m
doing what I was told." [laughter] He didn t use those words, of course. But she was so
disappointed. We all were. It wasn t a happy thing. But we all felt that we had to do it. The
35
loss of independence. It s still an independent company, more or less. It s still a public
company, at least. But it s no longer the baby Jesus.
Bugos: This longstanding dream of independence, I think, as a historian, is remarkable. Biotechnology
could have been a new scientific service function within the pharmaceutical industries. You
could have sold out earlier. Instead, by assuming this dream of independence you created a
separate industry, the biotechnology industry.
Perkins: Yes. And we did more than the one company. If you take Hybritech and Genentech, those
were the two best biotech companies we did at Kleiner Perkins. You could take the market
capitalization of all the other companies, add it up, and it wouldn t have equaled what we had in
Genentech and Hybritech. That s how good they were. That s the Kleiner Perkins model.
Brook Byers took over the financing of biotech from me. He still does a lot of biotech.
##
Perkins: Certainly, Bob Swanson wanted to be independent. I wanted to be independent too. I think it s
amazing we were able to do that as long as we did. The mistake we made was not in strategy, it
was in research. That s what caused it. We drilled too many dry holes in the mid 1980s, which
led to lack of product by the early 1990s. We figured it out and made changes, brought in
[Arthur] Levinson, and got it going again. You ll recall that we also changed research directors
about that time. Amgen, they did a better job on their product stream than us. I m sure there
was some bad luck too. We did four major efforts in AIDS, and you d think that one of them
would have panned out. They all looked extremely promising, but they didn t work. We put a
lot of resources behind them, but learned very late in the day that they wouldn t work out.
I had my least involvement in research. I went to the meetings and was educated on that but
not able to make judgments. I felt Bob had a terrific flair for that. While we backed some
horses that weren t able to finish the race, by and large his judgement was superb. Certainly in
the early years they were exquisitely done. If you look back at the percentage of products that
Genentech has developed that were ultimately successful, the percentage is pretty good. It s
just that we hit a dry streak there in the mid 1980s. We got hit with that dry spell at the same
time the stock market became weak.
Bugos: Did you think to in-license anything, to keep your marketing staffs busy?
Perkins: We did, but we never found anything. Maybe we didn t look too hard. We thought our
products would be OK, but at the end of the day learned that they weren t
36
Roche Acquisition, 1990: Hiring Frederick Frank of Shearson Lehman
[Interview 3: November 14, 2001] ##
Bugos: On our agenda today is to revisit the Roche acquisition announced in February 1990.
Perkins: OK. Before, we touched on the reasons to do the acquisition-the unmet R&D needs-and we
don t need to revisit that. On the acquisition, Raab and Swanson spearheaded the effort. I
remember a meeting in New York where we talked to Fred Frank [of Shearson Lehman
Button]. I think that was my first involvement with Fred Frank, though I subsequently used him
on other deals. I have a very high opinion of Fred Frank. He was a well-known investment
banker with a good track record in Pharmaceuticals.
Bugos: Genentech had actually engaged Frank at about the same time to sell its 25 percent share in
Genencor to a joint venture with Eastman Kodak.
Perkins: Yes. But I wasn t involved in that. I knew about all that, but I didn t negotiate that or meet
with Fred on that.
Kirk Raab was the primary promoter of using Fred Frank. Swanson went along with it.
Finally me, meeting him and being very impressed. Frank did an excellent job for Genentech.
The Roche thing was complicated and record-breaking and precedent-setting.
I was so impressed with him that subsequently, on another big deal where I was doing it all-
merging Tandem Computers into Compaq Computers, I used Fred. Even though it was a
computer industry deal, not a biotech deal. He hadn t done all that much in computers. Again,
he did a great job. I was delighted with their work.
He was very important in making the Roche deal happen. I don t know if anybody has
pointed out to you that Fred represented both companies in that deal. Roche had enough
confidence in, and respect for, Fred Frank that they did not use an investment banker. Maybe at
the last minute they got an opinion from somebody. But, basically, he represented both
companies. That s pretty astonishing. Very few investment bankers have that kind of support
from their clients. That was very impressive.
We did talk to Joseph Perella [of Wasserstein, Perella & Co.]. I remember lots of meetings
with Perella on lots of other deals. We used Fred Frank for this deal, though Perella is also very
good.
Bugos: How intensive was your own interaction with Frank?
Perkins: As we got deeper into the deal and approached the recommendation to the Genentech board of
directors, I did have telephone conversations with Frank. And Fred Frank, being as good as he
is and realizing I was chairman, made it his business to keep me informed. He would be calling
me, "This is just a quick update, Tom. Here s what s happening. This is what s being done.
Swanson is doing this. Raab is doing that. I think you ought to know that I think they re a little
out of line here, or there, or whatever." Asking me to help if needed. We had two or three
conversations a week in the early days. And then daily. And then hourly, towards the end.
37
Maintaining Secrecy to Avoid an Auction
Bugos: Press reports said that only six people at Genentech were informed of the deal before the
announcement on the second of February.
Perkins: That s probably fairly accurate. It may have been a few more than that. These things are so
hard to keep secret, but you have to keep them secret because of all sorts of securities laws. As
soon as the circle starts to broaden the probability of leaks expands exponentially. Probably to
the fifth power of the number of people involved. I just had a bitter experience with that on the
Hewlett-Packard and Compaq merger, which got leaked twenty-four hours before the
announcement. Horrible. So you have to work very carefully to make sure that that doesn t
happen.
Bugos: There were some shareholder suits, as there inevitably are, alleging that Genentech could have
done better had it advertised itself as being for sale more openly.
Perkins: Prior to engaging with Roche, we had scanned the horizon and we had picked them as being the
best possible and the only acquirer to be considered. I think that we were right about that.
History has shown that that was the right decision. We were very careful that this not become
an auction. When we announced the deal we wanted it to be so comprehensive and complete
that it would discourage anybody else. Which it did. We didn t want it to be an auction, for the
very reasons that led us to Roche in the first place. We were concerned about a hostile take
over, sort of the rape of the technology, and something that wouldn t be to the benefit of the
shareholders or employees.
Valuation of Genentech, Inc.
Bugos: When you go with a single buyer, though, calculated methods of valuing the company become
more important. Do you recall the various valuation methods Frank offered to you? It turned
out to be about one hundred times 1989 earnings, or ten time revenues.
Perkins: Those were the benchmarks, prior to the dot-corns at least. That s certainly at the high end of
valuations and so adequate protection against litigation, in my view. In the final fairness
opinion that was rendered by Lehman, they looked at all kinds of deals, and a range of other
transactions, as part of the due diligence of the board of directors. Prior to all that, in my view,
this was the best deal we were going to get. And it was a good deal, and the best deal, and it
was what we were looking for, and we approved it.
Bugos: As a venture capitalist, valuing is probably a key cognitive activity in your work. In terms of
the Kleiner Perians way of venture investing, over your whole career, is there an internal
methodology you prefer to use for valuing the companies that come to you?
38
Perkins: The answer to all that is no. First of all, our preferred mode is to take a company public, and
then the market determines what you get. Then we distribute those shares to our investors, and
then they sell them as they see the value. The selling of one company to another company is
maybe 10 percent of what we do. This was an exception, not the rule. Hybritech was sold,
similarly. Both Roche and Genentech had confidence that Fred Frank had gotten a very good
deal for both parties. We were not unhappy or disappointed at this strike price.
Deal Points
Bugos: In the prospectus describing the deal, the section on the background to the deal mentions three
points of contention that Roche proposed that Genentech opposed. One was an option for 20
percent of common shares, one was a substantial termination fee if the deal didn t go through,
and then the right of first refusal that Roche would have if any Genentech directors offered
public shares for sale.
Perkins: Yes, but I don t think any of those were big deals. One I do remember was that Swanson was
adamant that he wanted to go on the Roche board. That was just a non-starter. They were not
going to agree to that. Meetings took place in German, a language he didn t even speak. It was
a deal point, and he wasn t going to cave on that. Kirk and I had our hands full in talking him
out of that one, but we did.
Bugos: Would that serve any strategic purpose for Genentech?
Perkins: No. It was Bob Swanson wanting-a natural thing, I guess. But Roche wouldn t even consider
it. I remember discussing this with Fred Frank, and he said, "I presented it to them because I
was obliged to but, oh boy, this is not going to happen and we have to get Bob off of this kick."
Which we did.
Raab Becomes CEO
Bugos: You mentioned previously that Roche suggested to you that Raab become CEO.
Perkins: Yes. That seemed to have been understood early on. This was something that was going to
happen with or without Roche, in my view. Roche was just the event to make it happen. If we
hadn t done the Roche deal Kirk still would have become the CEO, but it would have been a
more difficult, long, drawn-out thing to accomplish. But it was going to happen. Bob was so
schizophrenic about it. On the one hand, he made a fortune, wanted to travel and enjoy his
family, take some time off, which is certainly the right thing to do. On the other hand, he didn t
want to give up the perks and glory of being CEO. Something had to happen and it was just
obvious that Kirk had to be the CEO. In a sense, the Genentech board used the Roche
transaction as the trigger to make that happen. I probably presented it to Bob as a deal point
demanded by Roche, which it was. But it may have been put in Roche s head along the way.
It had to happen.
39
Raab had a good track record at Abbott. He had run big things. As I told you earlier, from
the day Kirk Raab arrived at Genentech, it was clear that he was going to try to be CEO.
Swanson knew that this was going to happen. It was deferred for years. It finally happened.
There was an inevitability to it.
Roche People and Practices
Hugos: Some of the people involved in the deal from the Roche side were Fritz Gerber, the chairman,
Armin Kessler, the CEO, and Henri Meier, the CFO.
Perkins: Yes. I remember meeting with them in New York. I didn t go to Switzerland for this deal.
Talking for a couple hours with them; I met in private with them. And they were impressive
people. I liked them and felt comfortable with them. Particularly Fritz Gerber. A fine man.
Bugos: And he and Kessler were then elected to the board?
Perkins: Yes. Gerber didn t come to the meetings, though. Kessler did. Kessler was a very savvy
businessman, a lot of good ideas. It was a good addition.
Bugos: There were some concerns about that time over a clinical trial in Europe which pitted tPA
against a generic streptokinase. Was that a real great concern? Was that a European problem
Roche was expected to help you with?
Perkins: That was a not a primary factor. But Roche was helpful. When I think about Roche/Genentech,
my emotional foundation for it is this: It was good, it worked, they behaved well, everybody
benefitted, if we had to do it over again we d do it over again. There were bumps along the way
and little disagreements here or there. Raab would have been closer to the problems, and
certainly Bob would have been. From my perspective as retiring chairman, I had good feelings
about Roche.
What is good behavior? Obviously, they had an enormous financial stake in Genentech; they
spent a huge amount of money to acquire Genentech. Clearly, Kessler was going to watch out
for Roche s interests. That s natural. But I still felt that he was able to also represent the other
shareholders of Genentech and the employees and not just grind Genentech s face into whatever
agenda Roche had. He did a good job of being diplomatic. He was obviously a big brother in
this situation, with huge power, but behaved well.
As you recall, we set up the deal so that Roche did not control the board. They had two seats
out of maybe eight. This was something we wanted, something that Fred Frank sold to them as
being good for them. They shouldn t let the employee stockholders, and the world in general,
think that Genentech was just their errand boy, their lackey. That it would be good for all
parties if that s the way the deal was done. It was done that way and it worked.
My perception is that Roche did not try to malignly take over Genentech at the board level.
Roche behaved very well during this transaction, at least during my watch.
40
Bugos: After your watch ended in March 1995 came the best evidence that they behaved well because
Genentech extended their option to acquire the remainder of the shares, at increasing prices, in
December of 1995. Was it the sense of the board well before then that they would extend this
option to Roche?
Perkins: Yes. I was for it. The only problem involving Roche, after I left, was the Kirk Raab situation
which we talked about before. But that wasn t pushed by Roche. That was pushed by [John P.
McLaughlin. And I think it was in error.
Loma Prieta Earthquake
Bugos: OK. Roche paid the entirety of the 2.1 billion dollar acquisition from cash on hand. Because of
the deal you also had immediate access to 491 million dollars of new cash. I think you spent
most on new facilities. Did you have any other plans for that money?
Perkins: I can t remember. I remember there was a lot of cash. But Genentech had proven itself able to
spend any amount of money it was given, [laughter] It was never too much. That big research
laboratory was built about that time. Then Vacaville. Vacaville was necessary. I used to think
that 90 percent of my net worth was displayed along the San Andreas Fault in all these different
companies. Genentech was really exposed to earthquake hazard, I felt, so Vacaville made a lot
of sense.
There s a little interesting story there. That earthquake in October 1989 was a pretty big
one. I personally was on the middle of the Golden Gate Bridge when it hit. I ll never forget
that. It scared me. The next morning, Dave Packard and I were supposed to fly out, with Dave
Tappan, in the Fluor jet, to go to a Genentech board meeting in New York. It was all part of
this Roche thing, so it was a very important meeting. Reports were that bridges were down, it
was horrible. But I knew Dave Packard, and he would damn well leave, and that I better get to
the San Jose airport. I think we were going to leave at eight in the morning. I got up, and left at
like four in the morning from my house in Belvedere to get to San Jose. Of course, there was
no traffic, at all. Nothing. I got to San Jose in about forty-five minutes, sat around, [laughter]
Sure enough Packard showed up, and the Fluor jet arrived, and off we went. I had been able to
ascertain that Genentech hadn t been badly damaged. I asked Dave, "How s Hewlett-
Packard?" He said, "Gee, I don t know. My telephone was out." And I asked about the
Monterey Aquarium which, of course, he had built. He said, "I don t know." Here he is flying
out to a Genentech board meeting without knowing what happened to Hewlett-Packard or to his
aquarium. I was so impressed by his dedication. So I talked! to the pilot and asked if there was
any way he could call somebody at Hewlett-Packard and at Monterey and find out. The pilot
did, and came back and told Dave that everything seemed to be fine. Packard said, "Well, that s
good. Thank you."
Bugos: And so you were on the Bridge for the earthquake?
Perkins: Yes. It happened at five minutes after five. I had left the office a few minutes early. Kathy
[Jewett] was here. We were actually in a different building at the time. It was pretty scary.
The building was rocking and rolling, the file cabinets were overturned. Brook Byers was here.
41
They were having a meeting, that s why Kathy had remained. I just wanted to get home early
that night because there was a ball game that I wanted to watch.
That bridge was awesome. It shook. Being an engineer, as it was happening I was sitting
there thinking, "How many degrees of freedom does this bridge have?" It s going up and down.
It s going sideways. It s twisting. Cables are moving. I got to twelve degrees of freedom
before I realized that I may lose my freedom when this thing falls down. You may die.
[laughter] It was scary. You couldn t drive. All the cars had to stop and just sit there because
the roadway was just moving so violently. I was thinking to myself, you are such a god-damn
engineer. Here you are, the bridge may fall down, and you re trying to figure out how many
degrees of freedom it has. I said to myself, "This is sick." [laughter]
Hugos: I think everybody remembers that board meeting as the meeting after the earthquake.
Perkins: I have a feeling most of them were already in New York. Raab and Swanson had already gotten
there before the earthquake happened. It was only Packard and Tappan and myself that needed
to get there to talk about the Roche details.
Bugos: Did John Larson from Brobeck play any role in the structure of the acquisition? Did you get
any outside counsel other than that from Fred Frank?
Perkins: Fred was, of course, the investment banker. Larson did not play any role in the negotiation, but
he played some role in all the legal stuff that went along with it. And did it well. He s a good
attorney. Though [sighs], I subsequently had a falling out with him too. If you re in this
business long enough-I don t know if you have many friends. But that falling out had nothing
to do with Genentech.
Bugos: So those six months, between September 1989 and February of 1990, how much of your time
was occupied by this Genentech deal? Was it high drama in boardroom negotiations?
Perkins: This was something we wanted to happen. We wanted to be taken over by Roche, and did our
best job to make that happen in a constructive and profitable way. We were concerned that
somebody else might find out about this, and outbid Roche, and we might fall into hostile
hands. There was a huge amount of detail, about the cash and prices, and I was involved in all
of that.
Final Board Meeting on Swanson s Demands
Perkins: But the most vivid memory I have of the whole thing was of the final board meeting, which
went on beyond midnight. That was at a hotel by the airport.
##
Perkins: Frankly, it went on because of the eleventh hour demands of Bob Swanson which had not been
in the deal prior to that meeting. It was my job to negotiate with Bob. Kirk at this point
couldn t do it. He and Bob were at loggerheads. It fell on my shoulders to negotiate Bob out of
42
some of his demands, like the seat on the Roche board. He had ten unalterable demands that I
guess I boiled down to about four. Bob and I were leaving the meeting and working on it
together. "Working" is maybe not the best word. And then coming back to the meeting and
moving on. It went on for hours and it was very difficult.
I don t want to sound like apple pie and motherhood. But in the other things I ve done,
everyone gets treated the same. If it s good for shareholder A, it should be equally good for
shareholder B. What Bob was negotiating for himself, I felt, was too aggressive. I had some
success in talking Bob out of his demands, but not total success. I think that I and the rest of the
Genentech board had an air of resignation about this, "Look, we ve got to do the Roche deal, it
makes so much sense for all concerned. This is the price we have to pay, and we ll pay it."
Bugos: But were Swanson s concerns financial? Or did they have to do with his position upon the
transfer of control of the company?
Perkins: I think his greatest concerns were financial. I had been chairman of the board for essentially no
salary, or special payment for being chairman, or if there was it was maybe a thousand dollars a
year. And this suddenly went to half a million dollars a year, as I recall. Plus an office, plus a
secretary, plus, plus. Stock options and so forth. Yet he was not going to be doing any more
than I had been doing. I felt that was over the top. The merger was still worth doing, and it was
just one of those things.
Bugos: And all the negotiation at that point was through Fred Frank, rather than directly with Roche, so
that no misconceptions could hurt feelings?
Perkins: That is true. At that point I had no discussions with Roche. At that meeting Fred may have
been relaying updates to Roche. He must have because it all pertained to the T&Cs [terms and
conditions] of the deal.
Then on February second you issued a press release saying that the deal was going to happen.
Did you breath a sigh of relief at that point?
Bugos:
Perkins: Yes. [laughter]
Swanson-Raab Conflict
Perkins: I can t begin to tell you how difficult it was keeping the Raab-Swanson thing together over the
years. Just the endless hours I spent with those two guys. It was basically the same meeting
over and over again. Telling Kirk, "Look, there wouldn t be a Genentech without Bob
Swanson. You know that. Everybody knows that." Talking to Swanson, "Look. He s is doing
a great job of running this company. You ve got to let him do it." Just talking to each of them
separately, then getting them together. Getting them to say, "Yes, we love and respect each
other. Yes, we will behave." And it would hold for another month. Then bang, another one.
They were equally difficult. They both had short fuses. They did a pretty good job of hiding it
43
from the management and employees. Not perfect. Everybody knew there were troubles, but
not to the extent that I knew.
I had the same thing at Hybritech between Ted Green and David Hale. It could have been
from the same script. It s common. I guess I handled it pretty well over the years with all these
companies. I ve always felt that people were the primary problems in these deals. Rarely the
technology, rarely the financing. I was good at doing that. I remember once at Hybritech I had
to do it during a board meeting. It was like psychotherapy in front of an audience. I did it, got
them calmed down, they agreed to cooperate. Dave Anderson, from Sutter Hill Ventures, was
on the board. After the meeting he said, "You know, that was absolutely awesome. Do you
have to do that very often?" I said, "I think that is what I do. Corporate psychiatrist."
[laughter]
Bugos: For me to play psychiatrist, could I suggest that you yourself place some value in that sort of
conflict between potential CEOs?
Perkins: In other words, is that dynamic tension necessary for the success of the company? Absolutely
not. [laughs] It gets in the way. But they were both so damn valuable. You couldn t lose
Raab, you couldn t lose Swanson. They had to work together. It was my job to help them
realize that they had to be big boys and swallow their pride or resolve whatever the issue was at
that point. It was the same thing over and over.
Bugos: Did people below Raab and Swanson in the organization chart come to you for help in
psychoanalysis? People like Bill Young or Lou Lavigne?
Perkins: No. I don t recall ever getting a call. Maybe once, somebody saying you better get down here
because something is falling apart. Usually calls from Swanson or Raab saying, "Help." Or
saying, "I can t stand it, I m going to quit, or I m going to fire him."
You mentioned Bill Young, a good guy, and Lou Lavigne, a fantastic guy. He was a very
calming influence on Genentech. Lou s personality is such that when he walks into a room
people calm down. These are good players. I never had any trouble with any of the Genentech
officers. I liked them and worked well with all of them.
Bugos: How did Lavigne contrast with Fred Middleton, in some ways his predecessor, in terms of the
skills they brought or in the way they presented things to the board?
Perkins: They were both very good. Middleton was probably better in the quickly changing, more
dynamic situation of a small company. Lavigne probably had better people skills, big company
skills, political skills. But I don t mean that in a pejorative way. Lou has certainly been a
survivor and a cornerstone, for years. Fred had some troubles getting along with people at
times. But Fred was a very quick thinker. Fred was a good salesman. We re talking about two
really good people here. I don t need to draw distinctions.
Bill Young did a great job. I have no criticism of him.
44
Raab s Skills
Bugos: Did you ever think that Young would play the operations role that Kirk Raab was hired to play?
Perkins: No. None of the others, as big as they were-Gower, I suppose came closest. There was
nobody there that had the range of experience that Kirk had. Kirk was a very dynamic guy who
had excellent contacts in the industry, in government, on Wall Street. Kirk was a big presence.
Kirk was their peer-peer of the other industry CEOs~by his ability and his reputation. There
was not much rivalry between those subordinates and Kirk.
Bugos: In terms of how he was their peer, until a scientist like Roy Vagelos at Merck came along, most
pharmaceutical company CEOs came up through marketing and sales. Did you ever consider
marketing as the particular type of functional expertise you were looking for in a CEO, as
opposed to a research person?
Perkins: Oh yes. At the time Kirk came aboard, Bob was primarily interested in research, and did a
superb job in picking people, picking projects. We hit a dry spell, but that was more from the
research director then, David Martin. There was some bad judgment on his part and some bad
luck. He felt we should be doing major work in AIDS, which we agreed with, but none of those
projects panned out. And I think that was just scientific bad luck. But Bob was going to stay
on the research side. Kirk was going to do a good job on the operations side. That s the way it
worked.
James Power s Aggressive Forecast
Bugos: So Jim Gower was your marketing guy?
Perkins: Yes, but under Kirk.
Bugos: Did you ever consider Gower when you were searching for a CEO?
Perkins: No. We were looking for a major, famous, big-league player which was Kirk.
Bugos: Gower made some sales forecasts for tPA which made Genentech look like it was going to be a
billion-dollar company in 1990. When that didn t develop, by 1989, your stock started to tank,
leading ultimately to the Roche deal.
Perkins: And we got sued. Yes. Well. He shouldn t have done that, [laughter] It was a mistake. I
think he believed it, but it was too aggressive. It s an easy thing to do. And the press picks it
up. Just today, I was printed in the Chronicle as predicting that Compaq personal computer
business would return to profitability. I shouldn t have done that. That s too aggressive. But
in a long interview with a reporter, you say things you don t even recall saying. That s what
they pick up. It s under the line, but pretty close to the line, and I shouldn t have said it.
45
With Gower, it was over the line. He didn t mean to do it, but he did it. And Bob backed
him up rather than saying, "Now wait a minute." Because I think that Bob believed it too. So
they were both wrong.
Aggressive Patent Protection
Bugos: One other person in operations management, Brian Cunningham.
Perkins: I liked Brian. He was a tough, streetfighter kind of guy. Good guy.
Bugos: The aggressive patent protection policy that Genentech has long pursued? Obviously Kiley
enabled it, but did Cunningham establish the aggressiveness of the protection policy?
Perkins: I don t think that he out-Kileyed Kiley. Genentech was aggressive on all fronts. We were
famous for being aggressive. Not a bad reputation in my book. Not pejorative. With hindsight
we were not nearly as aggressive as we should have been in our contract negotiations. A large
number of the deals we made wound up in litigation or in patent infringement findings. Even
now, the City of Hope, twenty-five years later, is trying to collect royalties that, in my view, it
doesn t deserve. It s astonishing. Twenty-five years. Most of the players are dead. They want
hundreds of millions of dollars in royalties they claim they should have been paid. All going
back to those first contracts, those very first contracts that we negotiated. Their guy was named
[Ben] Horowitz, who is dead, and Swanson, who is dead. Those two negotiated it, with me
involved on the side, and with Kiley writing it up. There aren t many people around who
remember what happened. Much to my surprise, I did not testify in that trial. Of course, my
memory is so sieve-like, [laughs] Maybe that s why I didn t get called.
Suing the FDA
Bugos: Let me press your memory on another specific point under litigation, over memionine-free
growth hormone. About 1987 there was controversy with Lilly, somebody suggested suing the
FDA, and it got to the board level. What do you recall of that story?
Perkins: I do remember that one. I recall that the position the FDA took was that the Lilly product was a
new drug and a different drug. It probably was me that suggested we sue the FDA, expecting to
be talked out of it by Raab and Swanson. And was. When I said Genentech was aggressive,
well, I was aggressive. I wanted Genentech to sue the FDA on another point we talked about
earlier, this first amendment right to distribute research material. In both cases, I learned, you
don t sue the FDA. They ll crucify you for ever after. But I did feel, and I think I was correct,
that the FDA s decision was entirely political and not scientific. I think they simply wanted to
create more competition. That s the way they did it.
I don t think that was presented to the board. It was discussed between the three of us. I
don t think the board ever voted on whether we should sue the FDA. As a chairman of boards
46
over the years I can only recall one board vote that was not unanimous in all these companies,
and that one was just a mistake that I had made in misunderstanding the position of a director.
It happened to be George Shultz, who s a pretty important director. I thought he was happy
with what we were doing and we went around the table. He voted last, and he voted no. It was
a big shock to me, and a big mistake. Afterwards he said to me, "I have never been on a board
where decisions weren t unanimous." I said, "George, I haven t either. We better have lunch."
And we did and we worked it all out. I wouldn t let things come to a vote that weren t going to
be unanimous. If it wasn t going to be unanimous, let s keep working on it until it will be
unanimous.
Executive Committee of the Board of Directors
Bugos: So with Genentech, the mechanism for hashing out the agreement was an executive committee
of the board you, Raab, and Swanson~of which you were chairman? Even after the Roche
acquisition, I think, you remained chairman of the executive committee. So what is your
philosophy on the composition and responsibilities of the executive committee?
Perkins: Different companies do it differently, so I ll just talk about my view of an executive committee.
A true executive committee has the full power of the board and can do anything without
checking with the board. However, it s like one of those powers that, if you use it more than
once, you ll lose it. The Queen of England can dissolve Parliament but if she ever does it
they ll change the law. [laughs] It s a very strong power, but it has to be used very carefully.
The advantage of the executive committee is that if there is an emergency, if something
happens suddenly and you can t convene the whole board you don t know where they are, even
by telephone the executive committee can make a decision. For example, in the case of an
accident, a death, a crisis of some sort. It s a good thing to have an executive committee to deal
with crises.
The other directors, who aren t on the executive committee, can become comfortable with it
if they realize it s also dealing with housekeeping, day-to-day stuff that the rest of the board
doesn t need to be bothered with. If anything really important comes up, ninety-nine out of a
hundred times the committee will seek the approval of the full board before it does anything.
The committee will frame the issue, it will have done preliminary work so that the board
doesn t have to wallow around in all the nauseating details. The executive committee is a
mechanism to get things done for the board. If you re chairman of the board you better be
chairman of the executive committee also, because you don t want to have two competing
factions. Any time that there s been an executive committee, I ve always been chairman of it.
Then it gives the chairman of the board a little extra clout over the CEO, who normally has all
the clout. In the case of Swanson and Raab, it gave me some power in order to be able to deal
with them. If the psychoanalyst is also their boss it makes it work better.
Bugos: What about its role in soliciting information from within the company? Normally the CEO
submits to the board agenda items as well as the facts to come to a decision. Could you as
chairman solicit facts or discover problems management hadn t anticipated?
47
Perkins: Yes, but I lived at Genentech. I was there an afternoon or a day a week. I pretty much knew
what was going on. Bob and I would always discuss the agenda of the board meeting before the
meeting. Most boards don t have that much to do at their meetings. And a lot of it is idiotic.
By law, if the company wants to open a bank account in Hong Kong the board has to approve
that, whereas the company can spend a huge amount of money on an advertisement campaign
that the board may not even know about. So board meetings are a mixture of very dull
housekeeping things, and then a handful of strategic questions. Then, what do you do with the
rest of the time? They ve arrived. You ve got to keep them interested. So there will be
presentations from marketing or manufacturing or research. Bob and I would always go
through what s going to happen at the board meetings. From my point of view, the best board
meeting is a very boring meeting for me, because I know what everyone s going to say, I know
what s going to happen. Hopefully it s interesting for the other directors, but not an exciting
time for me. If a board meeting is exciting for the chairman, then the company is out of control.
Letting Swanson Chair
Bugos: Some have described your role during the Roche acquisition and afterwards as that of non
executive chairman in the British sense.
Perkins: I don t know exactly what that means. I had been chairman for so many years that I would
notice at board meetings, when someone was making a presentation, they would look at me.
When someone wanted someone to sum things up, they would turn to me. I had to force myself
to look to Swanson and let him sum up. Which I think I did fairly well. I tried very hard to let
him be the chairman, and not continue to be the chairman. Packard had let me be chairman of
Genentech, because he could have dominated the board. I didn t want to do the same thing to
Swanson, and I don t think I did. Bob never came to me and said, "Tom, you re not letting me
be chairman." So I guess I did it pretty successfully, because Bob would have been ultra
sensitive to that.
Bugos: So tell me if this is the sort of issue that would have been referred to the board-the 1988 quasi-
reorganization where you converted your accumulated debt into paid-in capital.
Perkins: Not to the board. That was Raab, Swanson, and Perkins. Then approved by the board. I think
that went fairly straightforward, for the SEC. Buying out the partnerships was a more radical
and unexpected issue. And one that I got caught up in, uniquely, because I had exercised some
stock options, and then the buyout of that partnership was a sell, and I was caught within a six
month period under Rule 16(b).
##
Perkins: It was very complicated. We made money on the deal. We had to be careful that it was fair to
everybody, including me. But that came up rather suddenly, those decisions.
Bugos: So this quasi-reorganization did not count as a significant innovation?
48
Perkins: No. Just bookkeeping.
Disengagement from the Board
Bugos: So in terms of understanding your role on the board. Could you please give us the chronology
of your retirement? Both from your venture partnership and from Genentech, and the role that
your family events played in that.
Perkins: My wife was diagnosed with cancer in September of 1990. She and I had been married for
thirty some years at that point. It hit me like a ton of bricks. She had been healthy, athletic; a
wonderful woman. That s her picture there, [points to an office table] I became intensely
involved with helping her fight off the cancer. She had stage-IH lymphoma, a terrible diagnosis.
We had some success, through a combination of conventional therapy and two experimental
treatments, one which I found out through my biotech connections. One was back East, done at
Dana Farber. One was done at Stanford from a Kleiner Perkins company, DEC. Each of
which probably gave her an additional year. Each of which we thought were going to save her
but didn t. And finally, a bone marrow transplant, which was a nightmare.
I was very involved with that. Deeply. She would have remissions and feel pretty good.
Then we would travel and do things together. Then the cancer would return and I d get back
into the hospital side of it with her. Every time she went back to the hospital I went with her
and stayed with her. There s just no way I could continue with what I was doing in business
and at Kleiner Perkins. So I stepped back from most everything.
At the highpoint of my career, which was long before she got ill, I was on seventeen boards
of directors, chairman of sixteen of the seventeen, plus the San Francisco Ballet and a couple of
charities. I was just a total workaholic. It was stupid, but I built Kleiner Perkins and got a lot
done. Anyway, I resigned from all the boards I was involved with when she got ill, except
Genentech and Tandem Computers, and maybe Acuson, which I subsequently resigned from. I
stuck with Tandem, in which I had a pretty large personal stake, through my wife s illness and
her death and into its merger with Compaq.
I felt that after the Roche thing that I could leave Genentech. But I didn t want to leave
Genentech while my wife was ill. I could go down there anytime and talk with Art Levinson
and others about cancer. I had a personal reason to stay close to Genentech. Bob Swanson
helped me. He opened doors for me. He was helpful in getting Gerd into these experimental
programs, which did help her. It was all mixed up together. After her death, that reason
disappeared. And I truly felt that my watch at Genentech was over. I had gotten Genentech to a
safe harbor. Genentech was going to be just fine without me. So I resigned from the board.
And as we know, soon after, it blew up. [laughter] Though I didn t expect that.
49
Genentech s Move into Cancer Therapies
Bugos: Genentech began to make a push into cancer drugs in the mid-1990s, culminating in Rituxan,
Herceptin. Did you play any role in that?
Perkins: No. I never played much role in the choice of research projects at Genentech. I knew about
them, but I never imposed myself in them, unlike with other companies where I was deeply
involved with those things. The combination of Raab and Swanson was beyond anything I
could contribute. So I took a back seat. However, Kleiner Perkins started EDEC. I knew about
all that and encouraged the companies to work together, but they didn t really need any
encouragement.
Kleiner Perkins Moves away from Biotech
Bugos: OK. In the early to mid 1990s Kleiner Perkins began to emphasize its investments in
information technology over biotech. What role did your quasi-retirement play in that?
Perkins: Well, for years we were active in a number of biotech companies. But you could add up the
profits we made in every one of those companies but Hybritech and Genentech, and it wouldn t
come close to what we made in just Hybritech and Genentech. I wouldn t say we lost interest
in biotech. We still do biotech deals from time to time. But there are these waves in
technology. In my career, I was in on the ground floor of lasers, of minicomputers, of
biotechnology, then finally, the Internet. I can t say that I was involved with the Internet
. because I wasn t active during the Internet craze. The partnership was. And there will be
another one. Thank God. We didn t get totally out of the Internet bubble before it burst, but we
got out more than most of our competitors did. We still lost our shirts, but not as badly as we
could have. I personally was very skeptical about it, and last year I shorted lots of stuff in the
Internet field before the bottom fell out.
But they ve all gone through bubbles. There was a laser bubble, a minicomputer bubble, a
biotech bubble. All these things get overbought, and then become oversold. It s human nature.
Fear and greed in their perpetual struggle.
Bugos: Does biotech have another bubble coming up? What do you see as its future?
Perkins: My advice to any young person is to put your money in biotech and forget about it for a long
time. Work in biotech. Biotech has changed our lives, but we re still just on the threshold. It s
profoundly important and will continue to be for a hundred years.
50
Venture Capital in Biotechnology
Bugos: And will venture capital continue to be the driving force in the shape of that industry?
Perkins: Well, venture capital involvement in pharmacology is an anomaly, not the rule. Big
pharmaceutical companies will continue to dominate the field. Universities will continue to
play their role, etcetera. But it s certainly been proven that a handful of venture capitalists can
make obscene amounts of money if they back the right biotech ventures. And that will
continue. There s a staggering amount of money available, still, to be invested in venture
capital. And most firms will still back biotech. Kleiner Perkins showed the way there. We did
the two biggest biotech deals in the early phase-Hybritech and Genentech, and caught
everybody by surprise. It was endlessly copied, and it ll continue to be copied. There will be
big new ideas, and entrepreneurs will emerge, and researchers will want to spin out of
universities and big pharma. After all, there s lots of incentives for those ideas to come to the
venture capitalists.
Bugos: Your competitors, or copiers, among venture financiers who backed biotech. Who have been
the most significant.
Perkins: I think [Franklin] "Pitch" Johnson with Asset Management [Partners]. He never forgave me for
not letting him in on the ground floor of Genentech, but then I did let him in on the ground floor
of Hybritech and he was very happy. And he was involved with Amgen. So he was involved
with two of the big three, as we were. I don t know anyone who was involved in all three of the
big three. Pitch Johnson, definitely. After that nobody, really, stands out above anybody else.
Nobody else was in on the ground floor. It s Pitch Johnson, Tom Perkins, Brook Byers, those
were the guys who saw it pretty clearly and very early.
Biomedical Devices and the FDA
Bugos: What about biomedical devices? How do those compare in terms of the role venture capital has
played in that industry?
Perkins: We ve certainly had mixed success there. Just in the newspapers from the last few weeks
there s been all this stuff about a left ventricle assist device, the implantable heart assist pump,
from Thoratec I think. Big deal. We had a company fifteen years ago called Novacor that did
exactly the same thing with implantation in patients. In this news there s not a single reporter
that s gone to the file and looked it up, and said this happened fifteen years ago. That company
failed completely because of the Food and Drug Administration.
To get an implantable device through the clinical trials, it s a hurdle so high that it often
doesn t happen, by anybody. It s certainly not a venture capital type of deal. I learned that
lesson, bitterly. Particularly with a mechanical device, like this implantable heart. I will
predict that this thing will disappear and never be seen again. They will find something wrong
with it. Could be a loose screw, or a spring that needs to be tighter, God knows what. You
make any change and you have to start all over again. It s impossible. In the course of your
51
research you have to always restart. This is an FDA idiocy, and I m sure it hasn t changed
since my encounter with it. It s nuts. Only a giant company can afford to do it. So I m very
skeptical about most biomedical products, at least those that deal directly with the body. We ve
have good luck with other types of biomedical devices.
It s not easy with anything dealing with the FDA. As soon as you say FDA, you re talking
hundreds of millions of dollars. Anything. What can you get through the FDA that doesn t cost
a hundred million dollars? Maybe a test kit. At Hybritech, our FDA problems were a fraction
of those for other companies. Still it s a hundred million bucks for a test kit, I suppose.
I don t think we need the FDA. I honestly think you can rely on peer review. The New
England Journal of Medicine is pretty good. Say whatever it is, device or drug, has to be peer-
reviewed and published in the New England Journal of Medicine. You can get rid of the Food
and Drug Administration, except maybe for testing hamburgers for bacillus. Sure, they play a
role there. It s the efficacy hurdle which is so subjective, and this goes back to Senator [Estes]
Kefauver in the fifties. It delays drugs and devices from life-saving applications, and the
American people pay the price.
Anybody, any entrepreneur, coming in with a drug or device that needs FDA approval, is
really asking for a multi-hundred million dollar deal before it will see the light of day. Unless
there s some way around it, like licensing, or whatever. There s lots of ways around it. That s
what we do, is try to be creative in getting through or around that brick wall. But if it s a frontal
assault, then it s just with money. And so much that a typical deal can t be done as you would
with an electronic device or anything else. But all deals have their problems. If somebody
walks in and says, "This device is going to put IBM out of business" [laughs] then you re
talking a pretty big investment before that happens. Going back to the early days of Genentech,
I didn t have a clue as to how many billions of dollars would be involved. Nobody did. We
just didn t think it through. I suppose if we had we wouldn t have done it. I m sure glad we
did.
The Promise of Biotech
Bugos: So you ve been a true believer in biotech for more than twenty years, enough to put that kind of
money into it. When your wife had cancer and you were confronting the medical system did
you ever have doubts in the faith that you had placed in the industry? Doubts in their ability to
actually deliver cures?
Perkins: When she got the diagnosis, first thing I did was call up a scientist at IDEC and say, "We ve got
to do this, we ve got to do that!" And he brought me down to earth by saying, "Look, what
we re doing is very experimental, probably won t work. She has really good prospects just by
doing the conventional chemotherapy." So that s what we did. He set me up with the doctor at
Stanford that we used throughout the whole period. With full hindsight, I think her life could
have been saved if we had done conventional chemotherapy followed immediately, or in
months, with a bone marrow transplant. Hit the cancer with everything you ve got up front.
But she wouldn t have done it, because she appeared to go into remission. A bone marrow
transplant is in itself a life-threatening process. Ten percent of the patients die in the process,
52
so it s not something you do quickly. It s sort of a meaningless thing to speculate on because
she wouldn t have done it anyway. So we lost the battle. It sort of ruined my life, and I haven t
gotten over her death. But thanks to my personal involvement with biotech I think she gained
two years that she wouldn t have otherwise had. That s pretty important.
Bugos: So you didn t lose your faith in the biotech effort?
Perkins: No. In the very early days of Genentech, I was very skeptical. Swanson never doubted that it
would work, because he had a background in chemistry, which has always been black magic to
me. I was very skeptical until somatostatin was expressed. I figured fifty-fifty on that one, or
even worse. You just have to hand it to Swanson. He saw it more clearly than anyone. He saw
it more clearly than Boyer did. He saw it more clearly than anyone in the world.
Belief in God the Creator
Bugos: You used the phrase earlier in this interview that the big technical risk was, "Whether God
would let you make a new life form." Was that flippant? Or do you believe that there is a God
looking out for the integrity of life forms?
Perkins: [Laughs] Oh, man. That s a very deep question and one that I have thoughts on. However, I m
not sure I can get them across very quickly or coherently.
I believe in God, but not in any sort of Christian or religious sense. I believe in God the
Creator. And now don t get me wrong. I am absolutely not a Christian fundamentalist, but I
believe Darwin only got it partly right. There is something in it, evolution, and it may just be a
chemical affinity for molecules wanting to get more complex that is written into life by, you
know, the Creator. Biological mechanisms, unlike every other system in the universe, defy
entropy. They become more complex rather than less complex, which is against the second law
of thermodynamics. I think there is a pattern that leads to genes being formed. There is a
theory about this, written by a Japanese scientist, called the theory of molecular evolution
which I think is underlying Darwin. I ve thought this way for a long time. I now think that
genetic manipulation is also in the genes. If we re smart enough to do it, we probably should do
it. I don t know if I should go any further into it than that. When I said "Will God let us do it?"
it s with all of that in the background. I think there is a God, yes.
Perkins s Law
Bugos: Then another take on this issue gets back to what people call Perkins s Law. Can you say for us
now if it is your law? That technical risk is inversely proportionate to market risk. Market risk
in Genentech is clearly a social good. There s no question that people need insulin, better
insulin, and that lives would be saved and made better by it. But there s that huge technical
risk.
53
Perkins: I ve said that many times and I believe it. Genentech is the outstanding example of it and the
structuring of the deal, which we ve talked about before, reflects that. It all was along the lines
that I believe in and practice in venture capital. Maybe it s just common sense; I don t know
that it s a law.
Bugos: Since its founding, do you think market risk has become a bigger factor at Genentech?
Perkins: As the technology becomes ever more powerful and the obvious targets have been picked off,
market risk will become eventually a bigger factor than it was in Genentech s history. Swanson
and his researchers would sit around and ask, "What are the problems, what are the needs?
What diseases are out there that our technology can access?" All of those problems that had
good market needs were sufficiently interesting, technically, to motivate the scientists.
Working on something that we were ultimately going to sell a lot of was technically worthwhile
for them. So they never felt that they were compromising their science for dirty lucre. And it
continues that way. We just have to hand it to Swanson. He created an extraordinary model
with Genentech. Swanson is a hero, not just to the people at Genentech, but in general. His
passing is a great loss.
The Genentech Model
Bugos: To sum up this interview, could you boil that model down to fit in the few minutes we have
remaining on this side of the tape? Or, what three things should entrepreneurs know about
Genentech before pitching you on a new biotech company?
Perkins: Underlying it all was Swanson s belief in the power of the technology. He saw it more clearly
than even Boyer. That was a cornerstone of Genentech-his belief that it could be done. And it
was not a naive belief. Maybe we were naive in figuring the amount of money it would take to
do it, but the belief in the technology was fundamental and essential. So optimism. That s one.
Two, was understanding that to do world-class work you had to have world-class people and
treat them extremely well, and create an atmosphere that was better than in a university
laboratory. Swanson saw that clearly, but with guidance from Boyer. Hence Genentech is a
world leader in scientific work, and papers from Genentech are basic to the entire field.
Third, that you can make a profit and that you d better make a profit. The sense of urgency
to get on with it, to get it done, do it quickly, do it efficiently, with a full understanding of the
importance of the bottom line. All companies should have that, but some are pretty casual
about it. I suppose this is where I entered the picture. Swanson and I never apologized for the
urgent need to make a profit, and to get on with it, and to commercialize these ideas.
Transcribed by The Prologue Group
Final Typed by Julie Allen and Kathy Zvanovec-Higbee
54
TAPE GUIDE--Thomas Perkins
Interview 1: October 24, 2001
Tape 1, Side A 1
Tape l.SideB
Tape 2, Side A 13
Tape 2, Side B 17
Interview 2: October 31, 2001
Tape 3, Side A 19
Tape 3, Side B 25
Tape 4, Side A 30
Tape 4, Side B 35
Interview 3: November 14, 2001
Tape 5, Side A 36
Tape 5, Side B 41
Tape 6, Side A 47
Tape 6, Side B not recorded
55
APPENDICES
A. Genentech, Inc., "Notice of Annual Meeting of Shareholders to Be Held
April 30, 1979" 56
B. Genentech, Inc., "Proxy Statement for Annual Meeting of Shareholders,
April 9, 1979" 57
C. Harvard Business School Bulletin, October 1982, "1957: to and from
the 25* Reunion" 69
D. Genentech, Inc., "Thomas J. Perkins, Member, Board of Directors,"
September 29, 1993 79
56 APPENDIX A
460 POINT SAN BRUNO BLVD., SUITE 1
SOUTH SAN FRANCISCO,. CALIFORNIA 94080
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1979
TO THE SHAREHOLDERS OF GENENTECH, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of Genentech, Inc. (the "Company"), a California
corporation, will be held at the offices of the Company at
460 Point San Bruno Boulevard, South San Francisco, California,
on Monday, April 30, 1979, at 10:00 a.m., for the following
purposes:
A. To elect a Board of Directors to serve for the
ensuing year and until their successors are elected;
B. To ratify the selection by the Board of Directors
of Arthur Young & Company as auditors for the fiscal year.
ending December 31, 1979;
C. To consider and act upon a proposal, described in
the accompanying Proxy Statement, to approve the Company s
Non-Qualified Stock Option Plan; and
D. To transact such other business as may properly
come before the meeting or any continuation or adjournment
thereof.
Shareholders of record at the close of business on
April 6, 1979 will be entitled to vote in accordance with
the number of shares of record in the name of each on that
date.
Whether or not you plan to attend the shareholders
meeting, please sign the enclosed proxy and return it in the
enclosed envelope.
By Order of the Board of Directors
Fred A. Middleton
Assistant Secretary
Dated at South San Francisco, California
April 9, 1979
57 APPENDIX B
GENENTECH, INC.
460 POINT SAN BRUNO BLVD., SUITE 1
SOUTH SAN FRANCISCO, CALIFORNIA 94080
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
April 9, 1979
GENERAL
The enclosed proxy is solicited by the management of
Genentech, Inc. (the "Company") for use at the Annual Meeting
of Shareholders to be held on April 30, 1979, or any con
tinuation or adjournment of that meeting for the purposes
set forth in the foregoing notice. The cost of solicitation
of proxies will be borne by the Company, including expenses
in connection with preparing and mailing this Proxy Statement.
In addition, the original solicitation of proxies by mail
may be supplemented by telephone, telegram and personal
solicitation by officers, directors or other regular employees
of the Company. No additional compensation will be paid to
such individuals.
Any shareholder giving a proxy has the power to revoke
it any time before it is exercised. It may be revoked by
filing with the Company at its offices at 460 Point San
Bruno Blvd., Suite 1, South San Francisco, California 94080,
an instrument of revocation or a duly executed proxy bearing
a later date. It may also be revoked by election to vote in
person while in attendance at the meeting.
Only holders of stock of record at the close of business
on April 6, 1979, will be entitled to notice of and to vote
at the meeting. Each shareholder, if he so chooses, may
cumulate his votes in election of directors. Each holder of
Common Stock will be entitled to three vot.es for each share
he holds and each holder of Preferred Stock will be entitled
to thirty votes for each share he holds. Each shareholder
may give one candidate all the votes he is entitled to cast
or he may distribute his votes among as many nominees as he
chooses. There are no conditions to the right to so cumulate
votes in the election of directors. Voting on all other
matters to be submitted at this meeting is noncumulative.
58
As of April 6, 1979 the Company had outstanding 746,750
shares of Common Stock and 61,371 shares of Series A Preferred
Stock (the "Series A Stock"). Each share of Common Stock
has one vote and each share of Series A Stock has ten votes,
except in the case of cumulative voting, where each share
has three votes and thirty votes, respectively. Holders of
Common Stock and holders of Series A Stock will vote together
as a group, rather than separately as a class, on all matters
discussed herein.
PROPOSAL A - NOMINATION AND ELECTION OF DIRECTORS
One of the purposes of the meeting is the election of
directors of the Company to hold office for the ensuing year
and until their successors are elected and have qualified.
Shares represented by executed proxies will be voted, if
authority to do so is not withheld, for the election of
nominees named below, unless one or more of such nominees
should become unavailable for election by reason of death or
other unexpected occurrence, in which event such shares
shall be voted for the election of such substitute nominees
as the management, may propose. Management knows of no
reason why any of the listed nominees should not be available.
The following table sets forth the name of each nominee
for director, the. positions and offices held by. him and his
principal occupation and the date on which he became a
director of the. Company.
Name
Robert A. Swanson
Herbert W. Boyer
Thomas J. Perkins
Principal
Occupation
President
of the Company
Professor of
Biochemistry
at University
of California-
San Francisco;
Vice-President
and Secretary of
the Company
Partner -
Kleiner, Perkins,
Caufield & Byers
Served as a
Director from
April 7, 1976
April 7, 1976
April 27, 1976
59
PROPOSAL B - SELECTION OF AUDITORS
Management recommends that the shareholders ratify the
Board of Directors selection of Arthur Young & Company as
auditors for the Company for the fiscal year ending December 31,
1979. The favorable vote of a majority of the votes cast
by holders of Common Stock and Series A Stock, taken to
gether, is required for ratification of the selection of
Arthur Young & Company. Arthur Young & Company has examined
the financial statements of the Company since its inception.
Representatives of Arthur Young & Company are not expected
to be present at the Annual Meeting. Management and the Board
of Directors recommends a vote in favor of such ratification.
PROPOSAL C - APPROVAL OF NON-QUALIFIED STOCK OPTION PLAN
At a meeting held on March 28, 1979, the Board of
Directors of the Company adopted, subject to shareholder
approval, a Non-Qualified Stock Option Plan (the "Plan")
pursuant to which it may grant stock options as an incentive
to selected eligible employees of and consultants to the
Company to provide a means by which such persons can acquire
stock in the Company, thereby increasing their proprietary
interest in the Company s growth and success. Management
believes the ability to grant options can be of value to the
Company by helping it to secure and retain the services of
persons holding key positions and those capable of filling
such positions.
Under the Plan, options to purchase up to 150,000
shares of the Company s Common Stock may be granted to
eligible employees at a price not less than eighty-five
percent (85%) of the fair market value of the Common Stock
on the date of grant and for an option period of not longer
than ten (10) years. The full text of the Plan is attached
hereto as Exhibit A.
The purchase price of the Common Stock issued upon
exercise of an option granted under the Plan is payable in
cash or by certified check at the time of exercise, or, at
the discretion of the Board of Directors, pursuant to a
deferred payment arrangement. Under the California Corpora
tions Code, a corporation may lend money or otherwise assist
any officer or director to purchase stock pursuant to an
option plan provided the plan is approved by the shareholders
3.
60
Since the Company s officers and directors who are also
employees are eligible to receive options, approval of the
Plan by the shareholders would allow the Company to issue
the underlying Common Stock pursuant to a deferred payment
arrangement.
The favorable vote of a majority of the votes cast by
holders of Common Stock and Series A Stock, taken together,
is required for approval of the Plan. Management and the
Board of Directors recommends a vote for this proposal .
OTHER MATTERS
Management knows of no other business to be presented
at the meeting, but if matters do properly come before the
meeting, it is intended that the persons named in the proxy
will vote in respect thereof in accordance with their best
judgment.
The Board of Directors encourages you to have your
shares voted by signing and returning the enclosed proxy.
The fact that you will have returned your proxy in advance
will in no way affect your privilege to vote in person
should you find it possible later on to attend. However, by
signing and returning the proxy you have assured your represen
tation at the Annual Meeting. Thank you for your cooperation.
By Order of the Board of Directors
Fred A. Middleton
Assistant Secretary
DATED: April 9, 1979.
4.
61
GENENTECH, INC.
NON-QUALIFIED STOCK OPTION PLAN
1. PURPOSE,
(a) The purpose of the Plan is to provide a means
whereby selected eligible employees and consultants of
GENENTECH, INC. (hereinafter called the "Company") and of
its subsidiaries may be given an opportunity to purchase the
Common Stock, $0.02 par value, of the Company (the "Common
Stock"). The word "subsidiary," as used in this Plan, means
a subsidiary corporation as defined in Section 425(f) of the
Internal Revenue Code.
(b) The Company, by means of the Plan, seeks to
retain the services of persons now holding key positions,
and to secure and retain the services of persons capable of
filling such positions.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board
of Directors until such time as the Board of Directors, as
stated in subparagraph (c), delegates administration to a
committee.
(b) The Board of Directors shall have the power,
subject to, and within the limits of, the express provisions
of the Plan:
(1) To determine from time to time which of
the eligible persons shall be granted options under the
Plan, and the time or times when, and the number of shares
for which, an option or options shall be granted to each of
them. <
(2) To construe and interpret the Plan and
options granted under it, and to establish, amend, and
revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect
EXHIBIT A
62
or supply any omission, or reconcile any inconsistency in
the Plan, or in any option grant, in a manner and to the
extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To prescribe the terms and provisions of
each option granted (which need not be identical).
(4) Generally, . to exercise such powers and
to perform such acts as are deemed necessary or expedient to
promote the best interests of the Company.
(5) The Board of Directors shall have the
sole and final power to determine all questions of policy
and expediency that may arise in the administration of the
Plan.
(c) The Board of Directors, by resolution, may
delegate administration of the Plan to a committee composed
of not less than three members of the Board, none of whom
shall be eligible for benefits under the Plan. If adminis
tration is delegated to a committee, the committee shall
have, in connection with the administration of the Plan, the
powers theretofore possessed by the. Board. of Directors,
subject, however, to such resolutions, not inconsistent with
the provisions of the Plan, as, from time to time, may be
adopted by the Board of Directors and subject to the provisions
of subparagraph (b)(5) of this paragraph 2. The Board of
Directors at any time may abolish the committee and revest
in the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
Subject to the provisions of paragraph 8 (relating
to adjustments upon changes in stock), the stock which may
be sold pursuant to options granted under the Plan shall not
exceed in the aggregate 150,000 shares of the Company s
authorized Common Stock and may be unissued shares or reacquired
shares or shares bought on the market for the purposes of
the Plan. If any options granted under the Plan shall for
any reason terminate or expire without having been exercised
in full, the stock not purchased under such options shall be
available again for the purposes of the Plan.
4. ELIGIBILITY.
Options may be granted to any employee of or
consultant to the Company and/or any subsidiary. A director
of the Company shall not be eligible for the benefits of the
Plan unless he is also a salaried employee of or consultant
to the Company and/or any subsidiary and unless and until he
63
is expressly declared eligible to participate in the Plan by
action of the Board of Directors of the Company, of which a
majority of the directors acting in any such matter are
ineligible for benefits under the Plan.
5. PURCHASE PRICE.
The purchase price under each option shall be not
less than eighty- five percent (85%) of the fair market value
of the stock subject to the option on the date the option is
granted .
6. TERMS OF OPTION AGREEMENTS. .
Each option grant shall be in such form and shall
contain such provisions as the Board of Directors or the
committee from time to time shall deem appropriate. Option
grants need not be identical, but each option grant by
appropriate language shall include or incorporate by reference
the substance of all of the following provisions:
(a) The term of any option shall be not more than
ten (10) years from the date it was granted.
(b) The minimum number of shares with respect to
which an option may be exercised in part at any time is ten
(10), unless the option grants the right to purchase fewer
than ten (10) shares. Said minimum number shall not change,
unless specifically changed by action of the Board of Direc
tors, by reason of any changes in stock to which paragraph
8 (a) hereof relates or any adjustments made under that
paragraph; in the event of any such changes in stock, the
Board of Directors may make such change in said minimum
number, if any, as the Board of Directors may deem appropriate
in the circumstances.
(c) The total number of shares subject to an
option may, but need not, be allotted in installments (which
may, but need not, be equal). From time to time during each
of said periods the option may be exercised with respect to
some or all of the shares allotted to said period, and, in
addition, with respect to some or all of the shares allotted
3.
64
to all prior periods with respect to which the option was not fully
exercised. During the remainder of the term of the option
(if its term extends beyond the end of the installment
periods) the option may be exercised from time to time with
respect to any shares then remaining subject to the option.
The provisions of this subparagraph are subject to the
provisions of subparagraph (b) relating to the minimum
number of shares with respect to which an option may be
exercised.
(d) The purchase price under each option shall be
as specified by the Board of Directors or the committee
described in paragraph 2(c) above pursuant to paragraph 5
hereof .
(e) . The purchase price of stock sold pursuant to
an option shall be paid either:
(i) in cash or by certified check at
the time the option is exercised, or
(ii) at the discretion of the Board of
Directors or the committee described in paragraph 2(c)
above, pursuant to a deferred payment arrangement with
the person to whom the option is granted or with his
legal representative, heir, legatee or distributee.
(f) The Company, during the terms of options
granted under the Plan, at all times will keep available the
number of shares of stock required to satisfy such options.
(g) The Company may require any person to whom an
option is granted, his legal representative, heir, legatee
or distributee, as a condition of exercising any option
granted hereunder:
\
(i) to give written assurances in
substance and form satisfactory to the Company to the
effect that such person is acquiring the stock subject
to the option for his own account for investment and
not with any present intention of selling or otherwise
distributing the same; and/or
4.
65
(ii) to grant the Company a right of
first refusal with respect to the stock obtained upon
exercise of the option, upon terms determined by the
Board of Directors of the Company.
No optionee shall be entitled to exercise any
option granted hereunder unless and until the issuance and
sale of shares pursuant to the portion of the option exercised
comply with all applicable laws and regulations, including,
without limitation, that such issuance and sale, if not
registered by the Company under the . Securities Act of 1933,
will, in the opinion of counsel to the Company, either
(1) meet all the requirements of Rule 147 under such Act
including the requirement that the optionee be a resident of
California at the time of exercise, or (2) meet all of the
requirements of Rule 240 promulgated under such Act or
another exemption from registration thereunder.
In the event that the Company shall deem it
necessary to register, under the Securities Act of 1933 or
any other applicable statute, any shares with respect to
which an option shall have been exercised, or to qualify
such shares for exemption under the Securities Act of 1933
under Regulation A of the Rules and Regulations of the .
Securities and Exchange Commission, or to register any such
shares under the Securities Exchange Act of 1934 or cause
such shares to be listed on any stock exchange, then any
such action shall be taken at the sole expense of the Company.
The Company shall have the right, however, to make any
reasonable determination concerning the time and the manner
of taking such action so that, for example, expenses may be
minimized and other factors affecting the Company interest
may be accommodated. Notwithstanding the foregoing, the
Company shall be under no obligation to register any shares
obtained upon the exercise of an option under the Plan.
(h) The Company, in order to comply with applicable
IRS regulations, is permitted to make the necessary with-
holdings required on taxable income arising from the exercise
of an option.
(i) Neither a person to whom an option is granted
nor his legal representative, heir, legatee or distributee,
shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to
such option unless and until he has exercised his option
pursuant to the terms thereof.
5.
66
(j) An option shall not be transferable except by
will or by the laws of descent and distribution, and during
the lifetime of the person to whom the option is granted he
alone may exercise it.
.(k) An option may not be exercised to any extent,
either by the person to whom it was granted or by any person
after his death, unless the person to whom the option was
granted has remained in the continuous employ or has served
continuously as a consultant to or director of the Company
or a subsidiary for not less than six (6) months from the
date the option was granted.
(1) An option shall terminate and may not be
exercised if the person to whom it is granted ceases to be
employed (as an employee or consultant) by the Company or by
a subsidiary of the Company, except if he dies while in the
employ of the Company or a subsidiary, his option may be
exercised at any time within not more than six (6) months
following his death by the person or persons to whom his
rights under the option shall pass by will or by the laws of
descent or distribution, but only to the extent that such
option was exercisable by him on the date of termination of
his employment. Nothing herein is intended to extend the
term of the option and in no event may an option be exercised
by .anyone after the expiration of its term established
pursuant to subparagraph 6 (a) above.
(m) The Board of Directors or a committee to
which the power to administer the Plan has been delegated
shall have the power to accelerate the date or dates on
which an option may be exercised, in whole or in part, not
withstanding the provisions in the option stating the time
during which it may be exercised.
7. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options
granted under the Plan shall constitute general funds of the
Company .
8. . ADJUSTMENT UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to
the Plan, or subject to any option granted under the Plan
(through merger, consolidation, reorganization, recapitaliza
tion, stock dividend, dividend in property other than cash,
6.
67
stock split, liquidating dividend, combination of shares,
exchange of shares, change in corporate structure or otherwise)
appropriate proportional adjustment may be made by the Board
of Directors as to the maximum number of shares subject to
the Plan, the number of shares and price per share of stock
subject to the outstanding options, and the minimum number
of shares with respect to which an option may be exercised
in part at any time.
(b) In the event of: (1) a dissolution or liqui
dation of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3)
other capital reorganization in which more than fifty percent
(50%) of the shares of the Company entitled to vote are
exchanged, any outstanding options hereunder shall terminate
except:
(i) when another corporation shall assume
such options or substitute new options therefor; and
(ii) the Board shall have discretion and
power in any such event to determine, and to make
effective provision therefor, that, notwithstanding the
provision of paragraph 6 (c) hereof, an optionee may
exercise his option for such number of shares, not
exceeding the total number specified by the option, as
the Board may determine and/or that any outstanding
options shall continue in full force and effect.
9. AMENDMENT OF THE PLAN.
The Board of Directors at any time, and from time
to time, may amend the Plan. Rights and obligations under
any option granted before amendment of the Plan shall not be
altered or impaired by amendment of the Plan, except with
the consent of the person to whom the option was granted.
10. TERMINATION OR SUSPENSION OF TBE PLAN.
The Board of Directors at any time may suspend or
terminate the Plan. The Plan, unless sooner terminated,
shall terminate on April 26, 1984. An option may not be
granted while the Plan is suspended or after it is terminated.
Rights and obligations under any option granted
while the Plan is in effect shall not be altered or impaired
7.
68
by suspension or termination of the Plan, except with the
consent of the person to whom the option was granted.
11. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by
the Board of Directors but no options granted under it shall
be exercisable until the Plan has been approved by the vote
or written consent of the holders of a majority of the
outstanding shares of the Company entitled to vote.
8.
Harvard Business School
October 1982
APPENDIX C.
mw; -X
WiSO
an
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((*
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i
to and from the 25th Reunion
71
The Fascination of the New
Venture n. An undertaking of Capital n. An aggregation of
chance or danger; the risking of (economic] goods used to pro-
something upon an event which mote the production of other
cannot be foreseen with cer- goods, instead of being valuable
tainty; a hazard; risk, specifi- solely for purposes of immediate
calJy, a business enterprise of a enjoyment.
speculative nature.
Webster s New International Dictionary (Second Edition]
irSS3S^^
by John March
" f jenture capital.
\ / Unlike manufacturing or consulting or the more traditional branches of
7 finance, venture capital is an area where few in the Class of 1957 have. . .well,
ventured; but among those that have, two have enjoyed an unusual degree of success.
At first glance, they are as different as night and day the one tall and deliberate,
with the seriousness of a confirmed problem-solver, the other of moderate stature and
a sunny enthusiast, open and curious. Just as different are the investment situations
where they ve chosen to become involved: seed financings and start-ups in the first case,
management buy-outs in the second. Both men, however, share a commitment to the
process of venture capital financing and its role in the American economy, and both
have demonstrated an unusual ability to serve as midwife to a wide variety of new
businesses.
Tom Perkins is a general partner of the San Francisco venture capital firm of Kleiner,
Perkins, Caufield & Byers, a firm notable for its early involvement with such high tech
nology enterprises as Tandem Computers and Genentech, each an acknowledged leader
in its particular field. (Perkins, as it happens, serves as chairman of both Tandem and
Genentech.)
His classmate Tim Hay.is chairman and president of the Security Pacific Capital Cor
poration, the venture capital arm of the Los Angeles-based Security Pacific National
Bank. A recent survey by Venture magazine ranked the Security Pacific Capital Corpora
tion eighth in total 1981 investments of all venture capital investors in the country on
the basis of the firm s decision to invest some $35 million last year in new ventures.
In the spring of this year, the Bulletin met with each man and later spoke with a
number of their associates, including several of the entrepreneurs with whom they ve
worked. What emerges is a compound answer to the question, What makes for success in
venture capital?
-.33 Bulletin October 1 S32
72
r g 1 om Perkins learned about high technology
start-ups in a way that not every venture
JL capitalist does as an inventor who
founded his own high technology company. An
engineer by training he received his Bachelor of
Science degree in electrical engineering from MIT
he capped his early investigations in laser tech
nology by developing a laser with broad industrial
applications.
Prior to Perkins work in this field, lasers had
been too delicate for most applications, and as a
result they rarely left the laboratory. It was Per
kins contribution to laser technology to develop
an instrument far more rugged (he made lasers,
among others things, shockproof and waterproof]
and capable of far broader application.
The company he formed to manufacture the new
laser was later merged into Spectra-Physics,
which in turn became the leading volume pro
ducer of lasers.
Perkins, in the meantime, moved on to Hewlett-
Packard, where he served as manager of that firm s
Cupertino, California, computer division from
1965 to 1970, the period of the division s initial
growth. In 1970 he was named director of corpo
rate development, a position he held until 1972.
"At that point," he recalls, "I decided I had
really enjoyed the whole entrepreneurial experi
ence I had had earlier."
And so thinking, he left Hewlett-Packard and
formed a partnership with engineer Eugene Klei
ner, a founder of Fairchild Semiconductor, to
invest in emerging high technology companies.
With their combined experience as engineers,
entrepreneurs, and line managers, and their broad
familiarity with the people and research activities
in the "Silicon Valley" area, they formed a power-,
ful combination.
Today, with the addition of several other part
ners, including Frank Caufield (MBA 68) and
John Doerr (MBA 76), the partnership has a base
capitalization of $70 million and a portfolio of
high technology holdings worth several hundred
million dollars. An adjective often used in the
trade and business press to describe the firm is
"high-flying," and it seems to fit.
We look for a proprietary position in an emerg
ing industry," says Perkins of the firm s invest
ment strategy. "Tandem manufacturers of so-
called fail-safe computers were the first in their
field, for instance."
The search for such key ventures, and the firm s
success in finding them, has earned Kleiner, Per
kins a high visibility, and today new proposals
crowd in at the rate of three a day. Not unnaturally,
given the publicity surrounding Genentech, they
include a number of suggestions for new ventures
in biotechnology.
However, says Perkins, the firm will invest only
once in a given area, and for an obvious reason:
"We don t want to fund competitors," he says,
"of companies we re already funding."
As for proposals that do survive the initial
screening, he adds, "The firm looks very hard at
the people themselves, because a good idea in the
hands of the wrong person will be a disaster. " And
this, of course, is the downside of flying high:
there is always the possibility of a rather dramatic
failure, despite the best-laid plans. And, in fact,
not every venture backed by Kleiner, Perkins is an
unqualified success.
"We have a higher loss ratio than some other
firms," admits Perkins, "because we take higher
risks.
"But when we hit a home run," he adds, "it s a
big one."
ne of their biggest home runs, of course,
has been Genentech, the Bay Area genetic
enginering firm now working to develop
such products as human insulin, human growth
hormone, and leukocyte interferon. When the firm
went public two years ago, shares were initially
offered at $35 on the first day of trading. One day
later, the price had skyrocketed to $89, so great
was the demand for equity in the fledgling com
pany. Although the initial fervor and the price
have since subsided, Genentech remains at the
forefront of commercial biotechnology. At the
same time, Kleiner, Perkins 938,000 shares of
Genentech, purchased at a reported average of
$1.85, have the look of a grand slam.
In retrospect, the firm s decision to fund the
basic research needed to demonstrate the commer
cial feasibility of genetic engineering research
for which they invested $100,000 in Genentech in
its earliest days was a smart one. Perkins, for his
part, attributes the decision in part to the indus
trial background he and Kleiner share.
"In that respect we re atypical," he observes.
"The typical venture capitalist has come from Wall
Street, and we ve come from the industrial world. I
think it s an industrial decision to invest in R & U
early on."
Kleiner and Perkins were also guided in their
decision by their knowledge of one of Genentech s
founders, president Robert Swanson. Before join
ing forces with molecular biologist Herbert BoyW
to form Genentech, Swanson had spent a yearn!
Kleiner, Perkins, having earlier been responsible
for Citibank s venture capital operations on the
West Coast. Thus, when Swanson returned to
56
HBS Bulletin October
73
them with a proposal of his own, Perkins and the
others were dealing with a known and respected
individual.
Swanson, for his part, remains impressed by the
readiness of Kleiner, Perkins to invest in what was
then largely an untried technology.
"The first round of financing wasn t for a great
deal of money it was $100,000 or so but I
think it s a good example of the way Tom can
respond," he says. "Herb Boyer and I had been
working for a number of months to put together a
business plan for Genentech, and then when we
had it ready we brought it in and made a presenta
tion to Tom and Gene Kleiner and by that after
noon we had a commitment.
"I think that s indicative. Once Tom sees some
thing, he s able to make up his mind and act
quickly. In this case, he saw the importance of this
new technology, just as he had done earlier with
lasers."
Swanson s counterpart at Tandem Computers,
president James Treybig, agrees.
"Tom has a fantastic ability to grasp business
opportunities," says Treybig. "He has a strong
technical background, and he understands mar
keting. That s not a combination you find in many
people.
"Also," he adds, "Tom feels and sees problems
very, very well. Sometimes he ll come in here and
say things, and I ll go away and think about them
and realize he s picked up on something I haven t
seen yet and he doesn t even work here."
Swanson concurs.
"He s one of what I call the early indicators, "
says the 34-year-old Genentech president. "Tom
sees things developing early and is able to point
them out. His perceptions that way have been very,
very helpful."
In addition to his regard for Perkins foresight,
Treybig also credits the Tandem chairman with a
willingness to try new approaches.
"Tom has some very innovative concepts in peo
ple management," says Treybig. "Most Tandem
employees, for instance, are shareholders. That s
something that may be a good idea, but if the board
doesn t say yes, it s not going to happen. And Tom
has been extremely supportive in this area.
"Let me give you another example. I ve known
Tom since 1968. When I first came to work for him
(at Hewlett-Packard], I had worked for just one
year and he hired me to manage about 25 peo
ple, most of them quite a bit older than me. That
took a lot of guts. I was 28 then. When I started here
at Tandem I was 33. What I mean by this is that Tom
is a guy who will evaluate an opportunity and take
a chance not only on a business, but on people."
One of Perkins fellow venture capitalists, Jack
Neises (MBA 56) of Boston s Charles River Part
nership III, sees this last quality in a slightly differ
ent light, using both Swanson and Treybig to
illustrate what he calls Perkins distinctive
approach to the practice of venture capital.
"One thing that s interesting about Tom is that
he s developed a kind of farm system," says
Neises. "He s taken people like Bob Swanson
and Jim Treybig and put them in a back room at
Kleiner, Perkins and let them work on conceptual
izing new businesses. Then at least in the case
of Jim Treybig when the business is ready to be
launched, he sends the man out to be president.
"I think that s a very distinctive approach. Most
people in the business are re-active, but Tom is
very pro-active."
Neises also cites Perkins operating experience
as an important asset in a field where such experi
ence is not widespread.
"Most people seem to come up through one of
the financial disciplines," he explains. "Tom is
one of the relatively few in the venture capital
business who have come from a significant operat
ing background. And I think that background,
which he got at Hewlett-Packard, has helped him
with some of the early stage start-ups that have
done so well for them.
"I ll give you an example. I m on the board of a
company called Zentec. In the early days of Tan
dem, Tom visited our terminals manufacturing
plant in Santa Clara to evaluate our product,
among others, and then went back to Tandem and
told them what he thought. Now, that s pretty
unusual for someone at the board level. Most ven
ture capitalists don t have the background for that.
Most of them, in a situation like that, have to just
sit back and make wise noises about financial
statements, but Tom could roll up his sleeves and
go in and do that kind of serious evaluation."
Still another observer, Stanley Pratt, editor of
the Venture Capital Journal, agrees that Perkins
operating background is an asset, and adds that
the San Franciscan has managed to avoid a com
mon pitfall of the line-manager-turned-venture-
capitalist: wanting to run the business that is
properly the entrepreneur s.
"The shift from operating to venture capital can
be quite dramatic," says Pratt. "You find that all of
a sudden you can no longer do things yourself.
You have to work through the entrepreneur. And
the good venture capitalist must learn that.
"In Tom s case, he has a marvelous ability to
work with the entrepreneurs, which is really the
secret of this whole business."
It is the long-term involvement with the entre-
HBS Bulletin October! 982
57
I*. l " "
.iayjviii:
74
70786-25 ***?
fMK
W*
75
Tom Perkins at Genentech: "When we hit a home
run, it s a big one."
preneur, adds Pratt, that distinguishes venture
capital from the other investment professions. As
important as the actual financing, he maintains,
are the advice and perspective that the venture
capitalist can provide over the long run.
"Venture capital used to be done by financial
types," he says. "They considered it a subset of
their financial and investment skills, but only that.
Nowadays, though, the venture capitalist really
needs other skills, and financial skills are merely a
subset of what he does which is to work closely
with the entrepreneur. And Tom epitomizes this.
It s really a five- to seven-year development pro
cess, and Tom has the long view, which is critical.
In fact, venture capital is one of the few places in
today s economy where that s still true."
Finally, says Pratt, Perkins "has a strong feeling
about the professional development of the indus
try," a feeling borne out during Perkins recent
tenure as president and then chairman of the
National Venture Capital Association.
Jack Neises explains:
"Tom would like to make venture capital a
higher calling, in the sense of a profession. Not
that it isn t a profession most of us in the busi
ness have advanced training of some kind. But
what we haven t had until recently is a code of
standards or ethics, such as doctors and lawyers
have. And that s not to say that venture capital isn t
a very ethical business I think it s an honorable
calling. But it was Tom who recently drew up a set
of standards for the national association, and,
again, I think that s typical of the kind of guy he
is."
At fifty, Thomas James Perkins looks
younger than his years, his features sug
gesting a middle range between Fess Par
ker and Gregory Peck. His corner office at Kleiner,
Perkins in San Francisco s Embarcadero Center is
set off from the lobby by interior walls of dark
glass. Near the windows by his desk stands a tele
scope, mounted on a tripod, which he uses to sur
vey the waterfront and the bay below. At his home
in Belvedere, Perkins maintains a machine shop,
where he rebuilds classic cars in his spare time.
On the evidence, it would appear that the onetime
engineer has not altogether forsaken the pleasures
of instruments and invention.
Nonetheless, he is quick to acknowledge the
basic difference between his former role as an
entrepreneur and his present responsibilities
as a venture capitalist.
"I sometimes feel like we re coaches on a team,"
he says, echoing Neises characterization of the
firm s farm system approach, "and I m sure that
sometimes the coach wishes he were in there play
ing himself. But our pleasure is vicariouk
"Still," hfi adds, "the fact that we do it at all
means there s a great deal of satisfaction involved."
There is this advantage, too: as a venture capital
ist, says Perkins, he has had broad opportunities to
utilize both his college and his Business School
training more so, perhaps, than he might have
had in a different profession.
"If you re working at a company," he explains,
"you tend to absorb the ways and mores of that
company. Whereas in our business, where we re
working with a number of different companies,
we re always going back to theory, if you will."
However, when it comes to evaluating a new
proposal, he adds, the firm s approach is consis
tent not only with theory but also with their col
lective experience and experience has taught
them to evaluate first how a proposed company
will be positioned with its risk and its market. And
though risk-taking is at some level indivisible
from the practice of venture capital investing, the
aim, says Perkins, is to eliminate the risk as soon as
possible.
"The risk must come out first," he insists. "That
may seem obvious, but it s very important all the
same. The first round of financing should elimi
nate the risk. The later rounds are just tcj make the
company go.
"The thing to remember, though," he cautions,
"is that the risk may not always be obvious. And if
you misidentify the risk, you may be very deep
into the venture before you realize it."
At that point, he observes, there s no turning
back.
"Once you re in, you re in. You either succeed.or
you fail because there s no in-between. There s
no market for a mediocre venture."
On the matter of markets for new ventures, Per
kins has a word of caution for the would-be ven
ture capitalist. Many investors have been drawn to
venture capital in recent years, he observes, by the
prospect of high returns a prospect that may
prove ephemeral as time goes on.
"It s not clear to me what the ultimate effect of
the rising rate of investment will be," he says. "It s
not clear, that is, how all of those investments will
eventually become liquid. Is the market going to be
there to absorb them? I m not sure the investor in
venture capital has always thought it all the way
through. And I don t think everyone is going to
make ten to one on their investments, either.
Some of them may lose heart.
"Still," he adds, "I do think that a prudent port
folio should have some portion in venture capital.
The returns have been too good to be ignored."
HBS Bulletin Octotigr 1982
59
iff."
77
Tim Hay at Cali/ornia s Cahn Instruments: "The"
justification of our risk money is change."
Beyond that, he notes, for practitioners like him
self the returns in personal terms sooner or later
outgrow the financial gains.
"What it s really all about," he says, "is the plea
sure of creating something new and interesting
and useful for the world."
ore often than not, says Tim Hay, he is
looking for the outcast.
Hay, chairman and president of the
Security Pacific Capital Corporation (SPCC), has
learned from experience that entrepreneurs are
often set apart from other people by the very quali
ties that make them entrepreneurs.
"I accept it as routine that these people will be
loners or eccentrics or driven in a way that may
seem neurotic to others," he says. "They may not
be tremendously happy, because they are driven
but they have a need to fulfill their vision. And
if their vision seems sensible, and their judgment
seems good and their temperament tolerable, we
just may be able to help them importantly."
Helping entrepreneurs importantly has been
Hay s job since 1964, when he was lured from his
position with a leasing concern (he had earlier
spent six years with Blythe & Co. as an account
executive) to direct the four-year-old venture
capital arm of what was then the Security First
National Bank.
At that time, notes Hay, the bank s venture capi
tal operation had neither mission nor goals. "It
was basically a side-door activity of the loan offi
cers," he explains, "and loan officers, who are not
trained to take risks, are not the logical people to
run a venture capital operation."
Hay, on the evidence, was.
When he joined Security First National, Secu
rity Pacific s predecessor, the bank had $1 ,200,000
of venture capital investments under manage
ment. Today the figure is $65,000,000 and rising
exponentially. What is perhaps more significant is
the fact that the bank has shown a profit from its
venture capital operation each year since it
acquired Hay s services. Accordingly, while the
bank s officers initially kept Hay and his col
leagues on a tight rein, "Now," he says, "they
give us tremendous autonomy."
As a result, Tim Hay apparently enjoys the best
of both worlds: he has the freedom to go his own
way despite his ties to the bank, yet at the same
lime he enjoys access to a virtually guaranteed
source of capital. (Though most of the firm s
resources are generated through its own earnings,
it did turn to the parent corporation last year to
help finance its record 1981 expansion.)
If the ties to the bank are felt at all, says Hay, they
are felt in the choice of venture capital activities.
Rather than concentrate on start-up and early-
stage projects, where the risk is always very high, , ,
the Security Pacific Capital Corporation has
turned to the marginally less risky field of man- .,-.
agement buy-outs. Taken individually, the returns
here are less spectacular than those of some of the 4
more highly publicized start-ups, but taken as a
whole they have spelled success for Security
Pacific.
Told of Tom Perkins home-run analogy, Hay
laughs and spreads his hands, responding good-
naturedly, "I suppose you d have to say we try to
hit a lot of singles and doubles."
he Security Pacific singles and doubles
are currently spread out over some 54
investments across the country, from a
California-based retailer of maternity clothes to a
manufacturer of precision rubber products in Ten
nessee to a Virginia-based furniture manufactur
ing concern.
"In each case," says Hay, "the justification of
. our risk money is change: a redeployment of
resources that represents more productivity, more
bang for the buck."
Like Perkins, he casts an especially critical eye
on the management personnel involved in an}
investment proposal. Distinguishing the good
from the indifferent, he says, is largely a matter
of looking at the record.
"What the individual has done that shows good
judgment, good reaction to crisis, clever innova
tion, and honesty and integrity," he observes, "are
especially important to the outside investor."
Beyond that, he adds, there is the question of
the deal itself and how it will be structured.
"It s rare that the original proposal does not
need to be reformed in some way," he notes,
"either by bringing in new people or new re
sources. And that s where our business can be
come very creative: taking bits and pieces and
reforming them to make what we see as a do-able
deal."
Once an investment has been made, however,
Hay and his colleagues are content to serve pri
marily as interested observers, offering advice
only as needed. This hands-off approach, he says,
is simply a matter of each party doing what it does
best.
"The skills of operating are quite different from
alternative investment decision making and deal
structuring," he explains. "If we are skilled in
selection, negotiations, and the nurturing of espe
cially efficient users of investment capital, it
doesn t necessarily make us good managers. There
HBS Bulletin October 1982
61
78
are some people, I guess, who think that having
the money gives them the authority to operate
businesses, and that s usually a mistake. My desire
is simply to select and stimulate excellent man
agers, rather than try to become a surrogate man
ager or a busybody investor."
Nonetheless, he concedes, the ventures he sup
ports do need occasional assistance, and when
they do he s there to help.
"The process is different for each company.
Sometimes it s careful expansion through acquisi
tion and a broadening of the management. With
others, it may involve product or distribution
innovations. On the other hand, sometimes we
find that it s useful to do some financial restruc
turing."
Joseph Globig, chairman of General Design, Inc.,
a Sun Valley, California, manufacturer of aero
space components and an early partner with
Security Pacific, is a strong supporter of Hay s
approach.
"Tim has the knack of allowing you to run if he s
satisfied that your goals are clear and you know
what you re doing," says Globig. "And to me that
means he s confident of his judgment.
"With some venture capitalists, you find that
they re always seeking more control. I think that s
not because they don t have confidence in the
business they ve invested in, but because they
don t have confidence in their own judgment.
Tim s not like that. His judgment is very good, and
his confidence reflects that. We ve invited them
any number of times to put someone on our board,
but he s never seemed to feel it was necessary."
Equally impressed with Hay s abilities are
industry colleagues, who named him president of
the 400-member National Association of Small
Business Investment Companies for the year
1973-74. Still another observer, Stanley Pratt of
the Venture Capital Journal, calls the SPCC presi
dent "an acknowledged leader" in the venture
capital field. "Most management buy-out activity
is centered in New York," he notes, "but Tim has
done a superb job in the Los Angeles area. You just
have to look at the bank s annual reports to know
that he s been extremely successful."
" ay is also a strong advocate of the economic
and even the moral virtues of venture
. capital, whose role he considers central
not only to the American economy but also to the
American idea.
"It s right at the core of what makes the whole
capitalist system work at its finest," he maintains,
"which is the serving of consumer needs most effi
ciently. The venture capitalist nurtures and helps
make possible innumerable creative innovations
throughout American industry in a way that isn t
always done by large corporations because of their
inertia. And it is the concentration on individual
initiative that keeps capitalism vibrant and its
rewards accessible to each individual. Without
the possibility that venture capital gives to the ful
fillment of the dreams and visions of individuals,
the capitalist system would not be as broadly
successful."
Perhaps not surprisingly, Hay is plainly at home
in southern California, where his thoughts on the
importance of the individual and on the boot
strap possibilities still open to the entrepreneur
find a ready audience. At the same time, however,
he credits the state s other (and in some ways
opposite) characteristic its tendency to be less
wed to tradition than other parts of the country
with having encouraged the growth of venture
capital operations there.
"I think one reason venture capital finds such a
base in California," he observes, "is the ease with
which change and innovation is accepted as a way
of life here."
Change, he continues, must always begin with
the individual, and the conditions for change, he
maintains, have rarely been better.
"Everything is in place," he says. "The money is
there through the venture capital industry. The
institutional framework is there through the low
ered capital gains tax. The world market is there.
"The crying need now," he says, returning to his
earlier theme, "is for individual action."
62
HBS Bulletin October 1982
79 APPENDIX D
Genentech, Inc.
THOMAS J. PERKINS
MEMBER, BOARD OF DIRECTORS
Thomas J. Perkins became a member of the Genentech, Inc. Board of
Directors in April, 1976 when the company was founded. Perkins is a founding
partner of Kleiner Perkins Caufield & Byers, a venture capital firm located in
San Francisco which has played a major role in the growth of the biotechnology
industry. Prior to that, he spent seven years at Hewlett-Packard Company,
where he started as assistant manager of corporate research laboratories,
moved on to become general manager of the computer division, and eventually
became director of corporate development.
Perkins 1 entrepreneurial spirit led to the creation of University
Laboratories, Inc., which he founded in 1965 and chaired until 1970. University
Laboratories, Inc. was the first to develop adjustment-free lasers. The company
prospered and was merged into Spectra Physics, Inc., one of the world s
leading laser companies.
Besides being a director of Genentech, Inc., Perkins also is chairman of
Tandem Computers Inc.; Acuson, Inc.; Alliant Computer Systems and director of
LSI Logic, Inc. In addition, he is a trustee of the San Francisco Ballet
Association.
Perkins holds a bachelor s degree in electrical engineering from the
Massachusetts Institute of Technology and a master s degree in business
administration from Harvard University.
###
9/29/93
INDEX-Thomas J. Perkins
80
Acuson, 48
Alfa Laval, 21
Alza, 24
Amgen, 35
Anderson, Dave, 43
Ayukawa, Yaichi, 31, 32
biotechnology industry, 50, 51, 52
Boyer-Cohen recombinant DNA patent, 8
Boyer, Herbert, 12, 20, 26
commercializing recombinant DNA, 4, 5, 7,
8, 52, 53
Byers, Brook, 14, 35
Caltech, Genentech contract, 5
Cape, Ronald, 4
Cetus, 12
and genetic engineering, 3
and Kleiner Perkins, 3-4
City of Hope Medical Center, 5-6, 45
Compaq Computers, 36, 37, 44
Cooley Godward, 1 1
Corning Glass Works, 13
Coyle, Bud, 20
Cunningham, Brian, 45
Diamond vs. Chakrabarty, 28
Doerr, John, 13
Eastman Kodak, 36
Eli Lilly, 19-20,22-23
and growth hormone, 45
and insulin, 8-9
Evans-Freke, Steven, 34
Farley, Peter, 4
Faulkner, Harry, 21
FDA [Food & Drug Administration], 26, 45,
50-51
Fluor, 21, 3 1,32, 40
Frank, Fred, 33, 36, 37, 39, 41, 42
Genencor, 36
Genentech
agriculture, 14-15
animal & veterinary products, 14
benchmarks, 21, 22
board of directors, 1, 20-22, 27, 34, 39,
41-42, 46-48
business plans/strategy, 8, 9, 14-15, 23, 24-
25,31-32,53
cancer therapies, 49
clinical R&D partnerships, 10, 11, 19,
33-34, 47
corporate culture, 7
executive committee, 46
FDA, 26-27, 45, 45
FIPCO status, 9, 23-24
foundation, 4-6
growth hormone, 27-28, 45
HIV/AIDS research, 26, 35, 44
intellectual property, 7, 8, 45
IPO, 10-12, 19,25,28-31
Kleiner Perkins investment in, 1,2, 4-7, 24,
49-50
location/facilities, 24-25
as a model company, 53
somatostatin, 6, 52
stock, 10-11, 17-18, 19,29-31,32, 34,40
tPA, 27, 3 9,. 44. See also Hoffmann-La
Roche
gene synthesis, 5
genetic engineering/gene splicing, 4, 5, 7
controversy, 24, 25-26
Gerber, Fritz, 39
Gower, James, 44-45
Green, Howard E., 14
Green, Ted, 43
Hale, David, 43
Hambrecht, Bill, 20, 29
Hambrecht & Quist, 20, 31
Hewlett-Packard, 8, 37, 40
Hillman, Henry, and family, 13
Hewlett-Packard, 15, 17, 21, 40
81
Hoffmann-La Roche
acquisition of Genentech, 9, 15, 16,
17-19,31,34-42
interferon contract with Genentech, 23
Home Health Care, 28
Horowitz, Ben, 45
HPGenenchem, 21
Hybritech, 14, 33, 35, 43, 49, 50
McLaughlin, John P., 40
Meier, Henri, 39
Middleton, Fred, 21, 33, 34, 43
monoclonal antibodies, 14
Monsanto, 15
Monterey aquarium, 40
Morgan Stanley Ventures, 33
Murfm, Don, 21
EDEC Pharmaceuticals, 49, 5 1
Inco (International Nickel), 20
insulin, human
agreement with Eli Lilly, 8-9, 19-20, 22-23
Kleiner Perkins investment in, 6-7
publicity, 6-7
investment bankers, 33, 36
Itakura, Keiichi, 5, 6
Jewett, Kathy, 40-41
Nomura Securities, 32
Novacor, 50
Packard, Dave, 15, 20-21, 34, 41, 47
Perella, Joseph, 36
Perkins, Gerd, 48, 51-52
Perkins s Law, 52-53
Perkins s religious beliefs, 52
Pillsbury, Brobeck, Sonsini, 1 1
Potts, John, 21
Kabi, 23
Kefauver, Estes, 5 1
Kessler, Armin, 39
Khorana, Har Gobind, 5
Kiley, Tom, 5, 23
Kleiner, Eugene, 1, 2, 3, 7, 11, 13, 15
Kleiner Perkins Venture Capital, 28, 31, 35, 49
Bob Swanson employee of, 3, 4, 15
Cetus investment, 3-4
foundation, 1-2, 15
Genentech investment, 1, 2, 4-5, 6-7, 12-13
investment strategy, 25, 30, 32, 33, 37-38,
49,53
white squire fund, 1 8
Larson, John, 41
Lavigne, Lou, 43
Levinson, Arthur, 35, 48
Loma Prieta Earthquake, 40
Lubrizol, 19,21
Mann, Bruce, 22, 28
Martin, Dave, 44
Mayfield Fund, 20
Raab, Kirk, 28, 44, 46
and FDA, 27, 45
and Roche acquisition, 15, 16-17, 36, 38,
39,41-43
as Genentech CEO, 38-39, 47
relationship with Swanson, 16-17, 41-43
Rifkin, Jeremy, 26
Riggs, Arthur, 5, 6
Royston, Ivor, 14
Securities & Exchange Commission, 10, 11, 28,
29
Steel, Danielle, 33
Swanson, Bob, 28, 34, 45, 52, 53
affinity with Japanese, 23, 31-32
and Roche acquisition, 35, 36, 38, 39, 41-42
employee of Kleiner Perkins, 1, 3, 7
foundation of Genentech, 4-6
and Genentech board of directors, 46, 47
and Genentech science, 7, 21, 44, 52
and IPO, 12, 20, 29
relationship with Perkins, 12, 13, 15-16
relationship with Raab, 16-17, 41-43
Syntex, 24
82
Tandem Computers, 1, 2, 8, 13, 25, 29, 36, 48
Tappan, Dave, 21,40, 41
Treybig, Jimmy, 1, 2, 16
University of California, San Francisco, 5, 6
Unterberg, Tommy, 20
Vagelos, Roy, 44
venture capital, 1-2, 3, 49-50, 53. See also
Kleiner Perkins
Wood, Dick, 22
Young, Bill, 43-44
Young, John, 21
Zaffaroni, Alejandro, 24
Glenn E. Bugos
Since 1994 has served as principal historian with The Prologue Group, a
corporate history consulting firm. He received his Ph.D. in 1988 from the
University of Pennsylvania, through the Department of the History and
Sociology of Science, Technology, and Medicine. He has published on the
history of biotechnology, aerospace, and other topics in the recent history of
business and technology.
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